India’s external sector remains strong, notes survey
A unified effort to reduce manufacturing costs is required for enhancing India’s export competitiveness, says the Economic Survey 2025-26 tabled in Parliament on 29 Jan by Finance Minister Nirmala Sitharaman http://services.india.gov.in.
“Further, durable external resilience and stronger currency credibility can emerge from augmenting manufacturing export capacity, supported by a disciplined, productivity-oriented industrial policy, careful management of input costs across value chains, and the complementary growth of high-value services,” said the survey.
Overall, to date, the Survey noted, “India’s external sector remains strong, with deepening global integration driven by robust exports, resilient services trade, and expanding trade networks. This reflects increased competitiveness, diversification, and adaptability to global demand.”
India’s current account structure reflects a merchandise trade deficit offset by strong net inflows of invisibles, led by rising surpluses in services and private transfers. In H1 FY26, the Current Account Deficit (CAD) moderated to US$15 billion (0.8 per cent of GDP) from US$25.3 billion (1.3 per cent of GDP) in H1 FY25. India is better positioned than its high-deficit peers, such as New Zealand, Brazil, Australia the UK and Canada in Q2 FY26.
The also noted that India remained the world’s largest recipient of remittances, with inflows reaching US$135.4 billion in FY25, supporting stability in the external account. The share of remittances from advanced economies increased, reflecting a growing contribution from skilled and professional workers https://www.bseindia.com/.
India has consistently attracted sizeable gross investment inflows, amounting to 18.5 per cent of GDP in FY25, even amid tightening global financial conditions. According to UNCTAD data, India remained the largest recipient of gross FDI inflows in South Asia and surpassed major Asian peers such as Indonesia and Vietnam https://sbi.com.in/.
India ranked fourth globally in Greenfield investment announcements in 2024, with over 1,000 projects and emerged as the largest destination for Greenfield digital investments between 2020-24, attracting US$114 billion. In April-November 2025, gross FDI inflows strengthened to US$64.7 billion, compared with US$55.8 billion in April-November 2024. This highlights sustained investor confidence despite a subdued global environment and reflects the underlying strength of India’s digital economy.
India’s FPI pattern shows recurring cycles of inflows and outflows, with significant shifts often linked to global financial changes. The data indicate volatility, with six months of net outflows and three months of net inflows, resulting in a modest net balance for the year-to-date. The swift return of inflows during these periods highlights that foreign investors’ medium-term view of India remains positive, even though their short-term allocations are influenced by high valuations of Indian stocks and global uncertainty https://www.nseindia.com/.
India’s foreign exchange reserves increased to US$701.4 billion as of 16 January 2026, up from US$668 billion as of the end of March 2025. In terms of adequacy, the reserves are sufficient to cover around 11 months of goods imports and about 94 per cent of the external debt outstanding at the end of September 2025, providing a comfortable liquidity buffer.
Indian rupee (INR) depreciated by approximately 5.4 per cent against the US dollar between 1 April 2025 and 15 January 2026. Economic Survey notes that currency performance is determined by the economy’s ability to generate domestic savings, sustain external balance, attract stable FDI, and build export competitiveness rooted in innovation, productivity and quality.
India’s external debt stood at US$746 billion at end-September 2025, up from US$736.3 billion at end-March 2025 while the External Debt to GDP ratio stood at 19.2 percent at the end of September 2025. Further, the external debt constitutes less than 5 per cent of the India’s total debt, which mitigates the external sector risks https://fieo.org/.
At the end of December 2024, India accounts for only 0.69 percent of global external debt, underscoring its relatively small contribution to global indebtedness. Fiinews.com
