India reduced investment in US Treasuries by over 18% in 2025

  • February 23, 2026
  • IR

Indian Express

India reduced investment in US Treasuries by over 18% in 2025

 

I. Core Context

The article reports that India’s holdings in US Treasury securities declined by more than 18% in 2025, falling from approximately $225.7 billion in January 2025 to $182.9 billion by December 31, 2025.

The reduction is situated in the broader context of:

  1. Rising global geopolitical tensions
  2. US trade protectionism and tariff measures
  3. Currency management strategies
  4. India’s evolving foreign exchange reserve composition

II. Key Arguments Presented

1. Portfolio Rebalancing Amid Geopolitical Risk

The article suggests that India reduced US Treasury exposure in response to:

  1. Global trade uncertainties
  2. US tariff actions
  3. Concerns about financial sanctions and asset vulnerability

The reduction is framed as strategic diversification rather than panic withdrawal.

2. Rise in Gold Reserves

It highlights that India’s gold holdings increased significantly during the same period.

This implies:

  1. A hedge against currency and geopolitical risk
  2. Reduced overreliance on dollar-denominated assets
  3. A shift toward tangible reserve diversification

3. RBI’s Investment Strategy

The piece notes that the Reserve Bank of India invests reserves across:

  1. US Treasuries
  2. Deposits with central banks
  3. BIS (Bank for International Settlements)
  4. Other sovereign instruments

The US remains important but not exclusive.

4. Global Trend of De-Dollarisation

The article situates India’s move within a broader pattern:

  1. Some countries reassessing dollar exposure
  2. Sanctions risk highlighted by the Russia experience
  3. Search for financial sovereignty

However, the US dollar remains dominant in global finance.

III. Author’s Stance

The tone is analytical and strategic.

The article does not portray the reduction as hostile but as:

  1. A calibrated reserve management decision
  2. A response to geopolitical volatility
  3. A prudent diversification move

There is no overt anti-US framing, but subtle emphasis on autonomy.

IV. Possible Biases and Limitations

1. Overinterpretation of De-Dollarisation

While the decline is significant, US Treasuries remain:

  1. Highly liquid
  2. Deep and stable
  3. Benchmark safe assets

The article may imply stronger structural disengagement than evidence supports.

2. Limited Macro Context

The reduction may also reflect:

  1. Yield movements
  2. Dollar index fluctuations
  3. Domestic liquidity needs
  4. Exchange rate management

These technical drivers are not deeply analysed.

3. Short-Term Snapshot

Reserve movements can fluctuate monthly.
A single-year decline does not necessarily indicate a long-term structural shift.

V. Pros and Cons of the Development

Pros

• Diversifies reserve composition
• Reduces exposure to geopolitical sanction risk
• Enhances financial sovereignty
• Signals prudent risk management

Cons

• US Treasuries remain safest and most liquid assets
• Gold lacks yield
• Reduced Treasury holdings may limit liquidity flexibility
• Over-diversification may raise volatility

VI. Policy Implications

1. Reserve Management Strategy

India must balance:

  1. Safety
  2. Liquidity
  3. Returns

US Treasuries provide liquidity; gold provides hedge stability.

2. Geopolitical Risk Assessment

Sanctions risk has changed global reserve behaviour.
India must:

  1. Avoid overconcentration
  2. Maintain diversified currency basket
  3. Strengthen rupee internationalisation gradually

3. Exchange Rate Management

Reserve allocation influences:

  1. Rupee stability
  2. External sector confidence
  3. Investor perception

A balanced strategy is essential.

VII. Real-World Impact

Short-term:

  1. Limited direct impact on India–US relations
  2. Signals cautious macroeconomic posture

Medium-term:

  1. Strengthens resilience to external shocks
  2. Encourages domestic financial market development

Long-term:

  1. Gradual diversification without abandoning dollar dominance
  2. Incremental move toward multipolar financial architecture

VIII. UPSC Relevance

GS Paper II

• India–US relations
• Global financial governance
• Geopolitics of sanctions

GS Paper III

• Foreign exchange reserves
• External sector management
• De-dollarisation debates
• Monetary policy and central banking

Essay Themes

• Financial sovereignty in a multipolar world
• Geopolitics and global finance
• Risk management in uncertain times

IX. Balanced Conclusion and Future Perspective

The reduction in India’s US Treasury holdings reflects calibrated reserve diversification rather than strategic disengagement.

US Treasuries continue to anchor global finance. However, rising geopolitical uncertainties and sanctions risks are prompting central banks to reassess concentration risk.

India’s approach appears pragmatic:

  1. Maintain substantial exposure to dollar assets
  2. Increase gold reserves
  3. Diversify instruments

The real test will be whether India can gradually strengthen domestic financial markets and expand rupee settlement mechanisms—without destabilising external sector confidence.

Reserve diversification must enhance resilience, not compromise liquidity.