External Sector Imbalances and RBI's Forex Management

Q1FY27 BoP deficit $8.1bn, but full-year surplus estimates $40B+; trade deficit at six-month high $31.98B. RBI closed FCNR(B) swap window after $56.84B, now curtailing dollar support. Forex reserves $707bn. Early closure caused bond yields to spike above 6.80%, liquidity surplus ₹4T. Rupee slipped to 95.61. Analysis reveals hidden costs of exchange rate policy and risk allocation in FCNR(B) deposits. NITI Aayog report highlights need for domestic value addition. Status: developing.