RBI governor expresses confidence to keep CAD in check on healthy services exports coupled with strong remittance receipts

RBI governor in its December policy stated that Indias current account deficit moderated from 2.2 per cent of GDP in Q2:2024- 25 to 1.3 per cent in Q2:2025-26 on account of robust services exports and strong remittances. In October 2025, merchandise exports contracted year-on-year, whereas merchandise imports continued to increase for the second consecutive month, resulting in a widening of the trade deficit. Healthy services exports coupled with strong remittance receipts are expected to keep CAD modest during 2025-26.

On the external financing side, gross foreign direct investment (FDI) to India increased at a robust pace during the first half of the year. Net FDI also increased significantly due to a decline in repatriation despite a rise in outward FDI.22 Foreign portfolio investment (FPI) to India recorded net outflows of US$ 0.7 billion in 2025-26 so far (April-December 03), due to outflows in the equity segment. Flows under external commercial borrowings and non-resident deposit accounts moderated as compared to last year. As on November 28, 2025, Indias foreign exchange reserves stood at US$ 686.2 billion, providing a robust import cover of more than 11 months. Overall, Indias external sector remains resilient, he noted.

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