1. RBI Sells $$$7.7 Billion in US Dollars
The Reserve Bank of India (RBI) net sold $$$7.7 billion in the spot foreign exchange market in August 2025.
- Reason for the Sale: The primary purpose of the dollar sale was to stabilize the Indian Rupee (INR) and curb excessive volatility against the US Dollar (USD). The Rupee had depreciated significantly during this period, breaching the 88-per-dollar mark for the first time.
- Mechanism: When the RBI sells USD, it increases the supply of dollars in the domestic market and simultaneously removes Rupees, which helps to strengthen the Rupee’s value and manage exchange rate fluctuations.
- Scale of Intervention: The $$$7.7 billion sale in August was nearly three times higher than the net sale of $$$2.54 billion in July, indicating a strong intervention to mitigate downward pressure on the Indian currency.
- Context: This move unfolded amid global currency turbulence, a strong US dollar, rising import costs, and pressure on the Rupee from global factors and trade tensions.
2. US Agrees to Reduce Tariff to 15% (Trade Deal Progress)
The reported agreement by the US to reduce tariffs on Indian exports to 15-16% from the current high of 50% is a key component of an ongoing and advanced trade deal negotiation between India and the United States.
- Current Tariff Situation: The US currently levies a steep tariff on most Indian exports, which totals 50%. This is composed of:
- An additional 25% penal tariff imposed by the US, partly due to India’s continued imports of discounted Russian crude oil.
- An earlier 25% reciprocal tariff.
- Proposed Reduction: Reports indicate that a trade deal is close to finalization, which could see tariffs on Indian exports drop to the 15% to 16% range.
- Key Concessions from India: As part of the negotiation for this tariff reduction, India is reportedly considering:
- Gradual Reduction of Russian Oil Imports: Quietly advising state-run oil companies to diversify crude sourcing away from Russia and toward the US.
- Market Access for US Agriculture: Permitting increased imports of non-genetically modified (GM) American corn and soymeal to meet domestic demand.
- US Expected Concession: In return, the US is expected to lower its import tariffs on a range of Indian goods (including textiles, engineering, and pharmaceuticals) to the 15-16% level.
- Potential Announcement: The deal is reportedly in its final phases and could be announced at the ASEAN Summit later this month.
In essence, the RBI’s dollar sale was a monetary policy action to defend the Rupee, while the US tariff reduction is a major outcome expected from high-level bilateral trade negotiations, where the reduction of Russian oil imports is a key condition.
