External sectors steady despite geopolitical uncertainties: RBI

Mumbai: India's external sector remains steady, with an improving outlook aided by foreign investment inflows despite global uncertainties, the Reserve Bank of India (RBI) said in its State of the Economy report in its monthly bulletin. While the farm sector is witnessing an uneven southwest monsoon, the impact on food inflation may be mitigated by comfortable foodgrain stocks, the RBI said.

The central bank said that despite the global economy facing an uncertain environment, supply chain disruptions and fragmented trading relationships, the Indian economy remains on a strong footing.

"Amidst these uncertainties, India remains among the fastest-growing major economies in the world and has been able to sustain the momentum in economic activity through June. Both industrial and services sector indicators remained firm. The farm sector is witnessing an uneven southwest monsoon, but the impact on food inflation may be mitigated by comfortable foodgrain stocks," the RBI said.


India's foreign exchange reserves remain comfortable, providing cover for more than 10 months of goods imports and around 88.5% of external debt outstanding as of end-March 2026, the same level as in June.

The momentum in external trade was sustained, as reflected in strong growth in exports and imports during the first quarter of the current fiscal year. Data released earlier this month showed that merchandise exports rose 16% to $129.32 billion during April-June 2026-27, compared with $111.57 billion in the corresponding period a year earlier. Imports during the quarter climbed 18% to $270.15 billion, resulting in a trade deficit of $37.42 billion, up from $20.85 billion in the same period last year.

India's external trade will receive a further boost from the recent operationalisation of the India-UK Comprehensive Economic and Trade Agreement and progress on other bilateral trade agreements, the RBI said. "External vulnerability indicators also remained sound. The recovery in foreign investment in recent months shows a revival in confidence in the economy," it said.

India's external debt-to-GDP ratio remained above 20% in March 2026, broadly unchanged from a year earlier, while the reserves-to-external debt ratio remained above 90%, RBI data showed.