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Informist, Wednesday, Jul. 22, 2026

 

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--RBI paper: Industrial, services sector indicators remain firm 
--CONTEXT: Comments by RBI's State of the Economy paper in Bulletin for July 
--RBI paper: Comfortable foodgrain stocks mitigating monsoon hit to CPI 
--RBI paper: UK FTA, bilateral trade pacts to boost exports 
--RBI paper: External vulnerability indicators remain sound 
--RBI paper: Foreign inflows in recent mos show revival of confidence in econ 
--RBI paper: India's external sector remains steady with improving outlook

 

NEW DELHI – The revival in foreign investment inflows in recent months reflects renewed confidence in the Indian economy, the Reserve Bank of India's staff said in an article on Wednesday. "India's external sector remains steady with an improving outlook, aided by inflows of foreign investments," the central bank staff said in the 'State of the Economy' article of the RBI's July bulletin. 

 

Foreign portfolio investors pulled out $24.67 billion from Indian markets during Jan-May, more than triple the $7.6 billion withdrawn in the corresponding period last year. The central bank and the government announced a slew of measures to attract foreign capital after the rupee came under pressure from a surge in crude oil prices and strong foreign capital outflows following the outbreak of war in West Asia at the end of February.

 

On Jun. 5, RBI Governor Sanjay Malhotra announced a concessional foreign exchange swap facility until Dec. 31 to incentivise external commercial borrowings by public sector undertakings. He also introduced a facility under which the RBI will bear the full hedging costs for banks raising fresh three- to five-year foreign-currency non-resident (bank) deposits until Sept. 30.

 

Foreign investment inflows improved following the measures announced by the RBI and the government, totalling $2.69 billion in June, up from $2.38 billion in June last year. Foreign portfolio investments totalled $4.63 billion so far in July. The rupee, which had also depreciated to a record low of 96.96 per dollar in May, has since recovered slightly to 95.57 against the dollar as of Wednesday.   

 

"... there was a surge in FCNR(B) deposit inflows amounting to $17.4 billion from Jun 8 to Jul 17, 2026," the article said. "During the same period, OFCBs (overseas foreign currency borrowings) and ECBs (external commercial borrowings) recorded inflows of $1.97 billion and $1.34 billion, respectively," it said.

According to the RBI staff, India's external vulnerability indicators, including external debt-to-GDP ratio, net international investment position-to-GDP ratio, debt service ratio and short-term debt (residual maturity) to reserves, remained contained. The views in the article are of the authors and do not represent those of the central bank, the RBI said. 

 

The RBI staff said India's exports have shown resilience amidst the global uncertainties and are likely to be strengthened by the recent operationalisation of the India-UK free trade agreement. The India-UK Comprehensive Economic and Trade Agreement came into effect on Jul. 15. Under the deal, the UK has committed to tariff concessions on 99% of India's exports to the UK. New Delhi has also offered duty cuts on 90% tariff lines. Progress in other bilateral trade agreements will also boost exports, the paper said. 

 

"The global economy is dealing with an uncertain economic environment, supply chain disruptions, and fragmented trading relationships. Amidst these uncertainties, India remains among the fastest-growing major economies across the globe," the article said, citing the International Monetary Fund's World Economic Outlook update. This growth momentum is aided by both industrial and services sectors remaining firm, according to the report. The Indian economy grew 7.7% in 2025-26 (Apr-Mar), with the RBI projecting GDP growth at 6.6% in FY27. 

 

While the economy is on a strong footing on the external side, risks to India currently emanate from lower-than-normal monsoons and Super El Nio conditions. The India Meteorological Department has projected the southwest monsoon rainfall to be below normal at 90% of the long-period average. As of Wednesday, the rainfall in the season so far has been only 81% of the long-period average.

 

Historically, weaker monsoons have led to sharp increases in inflation in India. The central bank staff, however, said that the impact of uneven monsoon on food inflation may be mitigated by comfortable foodgrain stocks. "High public foodgrain stocks should provide some cushion against price pressures," they said.  End

 

US$1 = INR 96.57

 

Reported by Priyasmita Dutta

Edited by Saji George Titus

 

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