Why was India unaffected one year after the May 7 aerial combat?

Most responses claim India’s international standing plummeted after the aerial combat—let’s examine the facts with data instead. There is no notable change in foreign investment inflows or inflation rates. Regarding exchange rates, the Indian rupee has depreciated continuously against both the US dollar and the Chinese yuan over the past year—but exchange rates are a complex indicator; depreciation is neither inherently good nor bad, and generally benefits exports. In Q2 2025, capital outflows reached $400 million—the highest in recent years—but subsequently rebounded, turning into net inflows this year. Conclusion: There was some impact, but it was far less severe than widely imagined—certainly not a war that would determine the nation’s fate. (1) Foreign investment utilization: No significant change before or after the aerial combat. (2) Inflation rate: Fell to a trough between May and October 2025, but has since rebounded to around 4%. (3) Exchange rate comparisons (USD/INR, CNY/INR) since May 2025: • USD/INR: Rose from 85 to 95—a 12% depreciation of the rupee over roughly 16 months. However, a similarly sharp depreciation occurred between 2021 and 2023. • CNY/INR: Rose from 11.8 to 14—a larger depreciation of ~19%, meaning the rupee weakened more against the yuan than against the dollar. From 2021 until May 2025, the CNY/INR rate had remained relatively stable. The five-year trend of CNY/USD is as follows. (4) Capital flows: $400 million flowed out in Q2 2025—the largest outflow in five years. In 2026, however, net capital inflows totaled $80 million. —————————— Divider —————————— Supplement dated 2026-08-03: A Zhihu AI confidently cited data from the Reserve Bank of India’s (RBI) monthly and annual reports, claiming: “Net FDI for FY 2024–2025 dropped to $353 million—down 96.5% from nearly $10 billion in the prior fiscal year.” First, the cited fiscal year itself is fundamentally incorrect. India’s fiscal year runs from April 1 of one year to March 31 of the next. Thus, FY 2024–2025 covers April 1, 2024, to March 31, 2025—a period that predates the May 7 aerial combat entirely. How, then, could it possibly reflect its impact? Second, the cited net FDI figure is also misquoted. We downloaded RBI’s Annual Report for FY 2025–2026 directly from its official website—

The Reserve Bank of India intervened to stabilize markets; the rupee posted its largest single-day gain in over a month.

On Monday, the Reserve Bank of India (RBI) conducted large-scale intervention in the foreign exchange market. Combined with falling global oil prices and positive remarks from the central bank governor, this propelled the rupee to its largest single-day gain in over a month. According to informed traders, the RBI aggressively sold US dollars in the domestic currency market on Monday—intervening at a substantial scale. As a result, the rupee appreciated by up to 0.8% against the dollar, reaching 95.7838—the strongest daily gain since June 15. Meanwhile, RBI Governor Sanjay Malhotra, in an interview with The Hindu BusinessLine, stated that the central bank’s recent initiatives to attract foreign capital have drawn a strong market response. Banks have mobilized a cumulative total of $32 billion through foreign-currency deposit channels and other instruments. These remarks further bolstered market sentiment and accelerated the rupee’s rebound. Despite Monday’s rally, the rupee remains under pressure this month—ranking among the weakest performers in Asia.

Rupee Sails Past 95 to One-Month High, Premiums Drop Before RBI Decision

Aug 4, 2026

The Indian rupee reached a one-month high against the dollar, driven by a 5.2% drop in Brent crude oil prices. Traders expect the upcoming RBI policy decision to have limited impact compared to oil price trends.

reuters

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