Resilient External Sector Anchors India Amid Global Volatility
Union Minister of Finance and Corporate Affairs Nirmala Sitharaman tabled the Economic Survey 2025–26 in Parliament on Thursday, setting the tone for an economy navigating global turbulence with steady confidence. The Survey paints a reassuring picture of India’s external sector, highlighting robust exports, resilient services trade, and widening trade networks as key pillars of strength. Even as global demand shifts and uncertainty looms, India continues to deepen its global integration through competitiveness, diversification, and adaptability. In essence, the message is clear: while the world’s economic winds remain unpredictable, India’s external engine is not just holding firm, it is learning how to sail smarter.
Current Account And External Balance Snapshot
| Indicator | H1 FY26 | H1 FY25 |
|---|---|---|
| Merchandise Trade Balance | Deficit | Deficit |
| Offset by Invisibles | Strong services surplus and private transfers | Strong services surplus and private transfers |
| Current Account Deficit (CAD) | USD 15 billion | USD 25.3 billion |
| CAD as % of GDP | 0.8% | 1.3% |
| External Position vs High-Deficit Peers | Better positioned than New Zealand, Brazil, Australia, UK, Canada (Q2 FY26) | – |
India’s External Sector: Capital Inflows, Digital Strength, and Reserve Resilience
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Remittances at Record High: India remained the world’s largest recipient of remittances, with inflows of USD 135.4 billion in FY25, providing a strong and stable cushion to the external account.
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Skilled Workforce Advantage: A rising share of remittances from advanced economies highlights the growing contribution of skilled and professional Indian workers abroad.
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Strong Investment Inflows: Despite global financial tightening, gross investment inflows stood at 18.5% of GDP in FY25, underscoring investor confidence.
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FDI Leadership in South Asia: UNCTAD data show India remained the largest recipient of gross FDI in South Asia, surpassing peers like Indonesia and Vietnam.
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Greenfield Investment Hub: India ranked fourth globally in Greenfield investment announcements in 2024, with over 1,000 projects.
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Digital Economy Magnet: Between 2020–24, India emerged as the largest destination for Greenfield digital investments, attracting USD 114 billion.
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Rising FDI Momentum: Gross FDI inflows rose to USD 64.7 billion during April–November 2025, up from USD 55.8 billion a year earlier.
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FPI Flows Volatile but Resilient: Portfolio flows saw cyclical volatility, with six months of net outflows and three months of inflows, yet medium-term investor sentiment remained positive.
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Forex Reserves at Comfortable Levels: Foreign exchange reserves climbed to USD 701.4 billion as of 16 January 2026, covering 11 months of imports and 94% of external debt.
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Rupee Movement Managed: The rupee depreciated by 5.4% against the US dollar during FY26 so far, with currency stability linked to savings, external balance, stable FDI, and export competitiveness.
According To Economic Survey2026: External Debt Remains Manageable, Reinforcing India’s External Stability
India’s external debt position continues to inspire confidence and is widely viewed as positive. External debt stood at USD 746 billion as of September 2025, a modest increase from USD 736.3 billion in March 2025, reflecting routine borrowing activity. The external debt-to-GDP ratio remained at a comfortable 19.2 per cent, well within safe limits for a fast-growing economy. External liabilities account for less than 5 per cent of India’s total debt, significantly reducing exposure to global financial shocks. Notably, India’s share in global external debt stands at just 0.69 per cent, underscoring a stable, balanced, and resilient external sector.
Lower Costs, Higher Competitiveness: The Export Growth Blueprint
The Economic Survey demonstrates that India needs to enhance its export competitiveness through coordinated efforts and cost-effective operations instead of relying on ambitious goals. The pathway to achieving increased export growth requires complete reduction of manufacturing expenses throughout all stages of production. The Survey demands development of an industrial policy that promotes productivity growth through its industrial development programs while maintaining control over operational expenses. The simultaneous growth of high-value services creates two advantages because it strengthens export capabilities and boosts profit margins.
Efficient manufacturing combined with value-added services serves as the essential dual forces needed to establish long-lasting external stability while strengthening currency trustworthiness and enhancing India’s position in international trade.
(This article has inputs from ANI)
Aishwarya is a journalism graduate with over three years of experience thriving in the buzzing corporate media world. She’s got a knack for decoding business news, tracking the twists and turns of the stock market, covering the masala of the entertainment world, and sometimes her stories come with just the right sprinkle of political commentary. She has worked with several organizations, interned at ZEE and gained professional skills at TV9 and News24, And now is learning and writing at NewsX, she’s no stranger to the newsroom hustle. Her storytelling style is fast-paced, creative, and perfectly tailored to connect with both the platform and its audience. Moto: Approaching every story from the reader’s point of view, backing up her insights with solid facts.
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