Data compiled from Bloomberg shows that India’s stock of US government bonds decreased to approximately $190.7 billion by the end of October 2025 from $241.4 billion at the same time last year, highlighting a significant reduction in exposure to long-term US debt.
This reduction came even as US bond yields remained appealing. The 10-year Treasury yield moved between 4% and 4.8% during the period, typically a range that supports foreign inflows.
Economists say the drop in Treasury holdings appears to reflect a strategic rebalancing of India’s foreign exchange reserves, rather than being driven purely by returns on US bonds. This move aligns with broader efforts to diversify reserve assets amid evolving global economic and geopolitical uncertainties.
Dipanwita Mazumdar, an economist at Bank of Baroda, told MoneyControl that the reduction signals India’s intent to reduce reliance on dollar-denominated securities at a time when the US dollar index (DXY) has shown signs of softening bias. She added, “This points to India’s approach towards diversification and marks a shift in its forex strategy,”
A weaker dollar outlook and expectations of eventual US Federal Reserve rate cuts could have reduced the attractiveness of long-duration dollar assets. Meanwhile, the rising geopolitical risks and fragmentation in global trade and finance have prompted central banks, including the RBI, to review their reserve allocations.
According to MoneyControl, market participants believe India is shifting part of its reserves toward gold, non-dollar currencies and other sovereign bonds, with gold regaining favour as a hedge against currency swings, inflation and geopolitical uncertainty.
ALSO READ | India’s forex reserves drop by $9.80 billion to $686.80 billion
Mazumdar said, “In the current volatile global political landscape, we may again see higher gold holdings by the RBI,” adding that such a move would be in line with the broader global trend of central banks increasing their gold reserves.
India’s changing reserve strategy mirrors a wider shift among emerging markets toward balancing safety, liquidity and returns, while reducing over-reliance on dollar assets. Even as the US dollar remains the dominant reserve currency, analysts say India’s actions signal a more measured and diversified approach to reserve management.
ALSO READ | Bill threatening 500% tariff on India, China and others for buying Russian oil gets Trump’s nod
