India's service trade, remittances to support current account balance in FY27: RBI Annual Report
New Delhi, May 31
A robust outlook for India's services trade balance, particularly in software and business services, along with steady inward remittances from non-Gulf countries, is expected to support the country's current account balance in 2026-27, according to the Reserve Bank of India's Annual Report 2025-26.
In its assessment of the outlook for the external sector, the RBI said that despite uncertainties surrounding global trade and geopolitical developments, India's strong services exports and remittance inflows are likely to act as a key buffer for the balance of payments.
"Robust outlook for India's services trade balance, in particular software and business services, and inward remittances from non-gulf countries is expected to support current account balance during 2026-27," the RBI said in its Annual Report.
The central bank's optimism comes even as it flagged risks to merchandise exports from ongoing geopolitical conflicts and global policy uncertainty.
According to the report, implementation of trade agreements with key partners and a policy push to strengthen domestic manufacturing in strategic sectors are expected to improve export competitiveness and reduce dependence on imports.
The RBI noted that India's services exports have remained a major source of strength for the external sector. During April-December 2025, net services exports grew by 15.3 per cent year-on-year, driven primarily by software and business services, which accounted for 77.8 per cent of the country's total services exports.
The report also said that global spending on information technology is expected to remain strong, supporting demand for Indian software services exports.
"Going forward, robust global IT spending, as projected by Gartner, bodes well for India's software services exports," it said.
The RBI further highlighted policy measures announced in the Union Budget 2026-27 that could attract greater foreign investment into the country.
"The Union Budget 2026-27 announcements pertaining to tax holiday and safe harbour for foreign companies for developing data centres in India, and infrastructural investments to the tune of US$ 250 billion committed till 2047 in the India AI Summit 2026 augur well for attracting FDI," the report said.
The report added that liberalised foreign direct investment norms in the space sector, including allowing up to 100 per cent FDI in satellite manufacturing and components, are expected to attract global capital and technology.
It also said that the conclusion and implementation of ongoing bilateral and regional trade agreements could further boost India's trade and investment opportunities and support capital inflows during 2026-27.
India's external sector remained resilient during 2025-26 despite heightened global uncertainty, supported by a sustained services trade surplus and steady inward remittances, the RBI noted.
— ANI
Reader Comments
Finally some solid news! 🇮🇳 The FDI push in space sector and data centres is exactly what we need. But I'm concerned about the geopolitical risks mentioned - if global trade slows down due to conflicts, even our strong services sector could feel the heat. Hope the government has backup plans.
Software exports are great and all, but when will we have a manufacturing revolution? The report itself mentions merchandise export risks. We can't just rely on IT forever. Make in India needs real execution, not just policy announcements. Though the tax holiday for data centres is a welcome step!
Interesting to see the focus on trade agreements. The India-UAE CEPA has already shown benefits. We need more such pacts with UK, EU, and others. Also, Rs 250 billion investment commitment in AI infrastructure sounds ambitious - let's see how much actually materialises. But overall, cautiously optimistic for FY27.
The remittance story is underappreciated. With many Indians working in tech hubs globally, the steady flow of money back home is crucial. But the RBI should also address why our foreign reserves are still lower than some peers relative to GDP. Good report overall, but implementation is key.
As someone working in IT, I see the demand firsthand. Global companies are still relying heavily on Indian tech talent. But I worry about the skill gap - we need more investment in education and training to maintain this edge. The current account support is good news for the rupee too! 😊
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