India’s external sector remains on a strong footing despite heightened global uncertainty, supported by robust remittance inflows, resilient services exports, sustained foreign investment, and comfortable foreign exchange reserves, according to the Economic Survey 2025-26 tabled in Parliament by Union Minister for Finance and Corporate Affairs Nirmala Sitharaman.
The Survey highlights that India’s deepening global integration is driven by rising competitiveness, diversified trade and capital flows, and the economy’s adaptability to changing global demand conditions.
Current Account: Invisibles Continue to Anchor Stability
India’s current account continues to reflect a structural merchandise trade deficit that is largely offset by strong net inflows from services exports and private transfers.
- In H1 FY 2025-26, the Current Account Deficit (CAD) moderated to USD 15 billion (0.8 per cent of GDP), down from USD 25.3 billion (1.3 per cent of GDP) in H1 FY 2024-25.
- The Survey notes that India’s CAD remains significantly lower than that of several high-deficit economies, including New Zealand, Brazil, Australia, the UK, and Canada during Q2 FY 2025-26.
A key stabilising factor is remittances. India continued to be the world’s largest recipient of remittances, with inflows reaching USD 135.4 billion in FY 2024-25. The rising share of remittances from advanced economies reflects the growing contribution of skilled and professional Indian workers abroad, strengthening the quality and resilience of external inflows.
Capital Account: Strong FDI and Digital Investment Momentum
Despite tightening global financial conditions, India attracted sizeable capital inflows, with gross investment inflows amounting to 18.5 per cent of GDP in FY 2024-25. According to UNCTAD, India:
- Remained the largest recipient of gross FDI inflows in South Asia
- Surpassed major Asian peers such as Indonesia and Vietnam
India ranked fourth globally in Greenfield investment announcements in 2024, with over 1,000 projects, and emerged as the largest global destination for Greenfield digital investments during 2020-24, attracting USD 114 billion.
Between April and November 2025, gross FDI inflows increased to USD 64.7 billion, compared with USD 55.8 billion in the corresponding period of 2024, underscoring sustained investor confidence and highlighting the underlying strength of India’s digital economy.
Foreign Portfolio Investment (FPI) flows exhibited cyclical volatility, with six months of net outflows and three months of net inflows during the year-to-date period. However, the Survey notes that the swift return of inflows during episodes of volatility indicates a positive medium-term investor outlook, even as short-term allocations remain sensitive to global uncertainty and equity valuations.
Forex Reserves: Comfortable Buffer Against Shocks
India’s foreign exchange reserves rose to USD 701.4 billion as of 16 January 2026, up from USD 668 billion at end-March 2025. In terms of adequacy:
- Reserves cover around 11 months of goods imports
- Account for approximately 94 per cent of external debt outstanding as of end-September 2025
This provides a substantial liquidity buffer, enhancing India’s ability to withstand external shocks and capital flow volatility.
Exchange Rate: Reflecting Macroeconomic Fundamentals
The Indian rupee depreciated by around 5.4 per cent against the US dollar between 1 April 2025 and 15 January 2026.
The Economic Survey emphasises that exchange-rate movements are shaped by the economy’s ability to generate domestic savings, maintain external balance, attract stable FDI, and build export competitiveness rooted in productivity, innovation, and quality.
External Debt: Manageable and Low-Risk Profile
India’s external debt stood at USD 746 billion at end-September 2025, up from USD 736.3 billion at end-March 2025. Key indicators remain comfortable:
- External debt-to-GDP ratio: 19.2 per cent
- External debt constitutes less than 5 per cent of India’s total debt, limiting external vulnerability
- India accounts for only 0.69 per cent of global external debt (as of end-December 2024)
These metrics underscore the sustainability of India’s external financing position.
Outlook: Strengthening Export Competitiveness for Durable Resilience
Looking ahead, the Economic Survey stresses that durable external resilience and stronger currency credibility will depend on a coordinated effort to reduce manufacturing costs and enhance export competitiveness. Key priorities include:
- Expanding manufacturing export capacity
- Pursuing a disciplined, productivity-oriented industrial policy
- Managing input costs across value chains
- Complementing manufacturing growth with high-value services exports
Together, these measures are expected to reinforce India’s ability to navigate global volatility while sustaining long-term external sector stability. (Source: PIB PR ID 2219971)
Economic Survey of India 2025-26 dated 29/01/2026