India's external investment position improves, net liabilities decline in March 2026

Traders Union
All News
Central Banks
India's external investment position improved

Highlights

During the January-March 2026 quarter, net claims by non-residents on India fell by $52.4 billion, foreign assets declined by $40.1 billion, and investors' overseas assets increased by $12.3 billion.
At the end of March 2026, the assets-to-liabilities ratio stood at 85.2 percent, up from 82.0 percent a quarter earlier; the share of debt liabilities in total external liabilities reached 56.6 percent.
During the entire FY 2025-26, India's net external liabilities decreased by $119.2 billion and the net IIP/GDP negative ratio improved from 9.0 percent in March 2025 to 5.9 percent, strengthening the external sector.

This article was translated from the original. Read the original version by our correspondent here.

Key Highlights of March 2026 IIP Data

According to data released by the Reserve Bank of India, net claims by non-residents on India fell by $52.4 billion during the January-March 2026 quarter. This decline is due to a $40.1 billion drop in foreign-owned assets in India and a $12.3 billion increase in foreign financial assets held by Indian residents.

Changes in the rupee's exchange rate against other currencies affected the valuation of liabilities in US dollar terms. The main reason for the decline in foreign liabilities of Indian residents was a decrease in portfolio investment and direct investment in India, while the increase in inward direct investment in rupee terms was offset by a fall in US dollar value due to exchange rate depreciation.

Over 60 percent of the increase in foreign financial assets held by Indian residents during the quarter came from foreign direct investment, followed by reserve assets. By the end of March 2026, 57.1 percent of India's international financial assets were in reserve assets and nearly a quarter in overseas direct investment.

The assets-to-liabilities ratio rose to 85.2 percent in March 2026 from 82.0 percent a quarter earlier. Meanwhile, the share of debt liabilities in total external liabilities gradually increased to 56.6 percent in recent quarters.

FY 2025-26 and Macroeconomic Impact

During the entire FY 2025-26, net claims by non-residents on India fell by $119.2 billion. This was driven by a $42.8 billion reduction in external financial liabilities and a $76.4 billion increase in foreign financial assets held by Indian residents.

The growth in foreign assets throughout the year was mainly driven by overseas direct investment and reserve assets. On the other hand, a decline in portfolio and direct investment by non-residents reduced India's foreign liabilities.

The ratio of international financial assets to international financial liabilities improved to 85.2 percent in March 2026 from 77.5 percent a year earlier. The picture also improved in terms of GDP ratio, as the net IIP to GDP ratio improved from negative 9.0 percent in March 2025 to negative 5.9 percent in March 2026, indicating a strengthening of the external sector.

Our previous report discussed the 5.1% growth in industrial production (Index of Industrial Production) in May 2026 and the changes associated with the implementation of the new IIP series/Producer Price Index methodology. It highlighted that robust growth in electricity and gas supply and manufacturing, along with a sharp rise in capital goods, signals increased investment activity, although some segments showed weakness.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.