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    BUSINESS & TRADE                                                         JUNE 12, 2026     |  The Indian Eye 38

                        India’s Growth Story Faces Global

             Headwinds, but New Engines Offer Hope

                     Services exports, remittances and strategic reforms are emerging as key buffers

                                                   against mounting external challenges.

            OUR BUREAU                                                                                            structure investments worth US$250
                                                                                                                  billion committed until 2047 through
            New Delhi / Mumbai
                                                                                                                  initiatives announced at the India AI
                ndia’s economic outlook remains                                                                   Summit 2026. Such investments have
                broadly  positive,  but  the  road                                                                the  potential  to  strengthen  India’s
            Iahead is far from smooth. While                                                                      position  in  emerging  technologies
            the country continues to benefit from                                                                 and create new growth opportunities
            a strong services sector, rising foreign                                                              across sectors.
            investment  opportunities  and  resil-                                                                   “The  Union  Budget  2026-27  an-
            ient  remittance  flows,  policymakers                                                                nouncements  pertaining  to  tax  holi-
            face the challenge of navigating an                                                                   day and safe harbour for foreign com-
            increasingly uncertain global envi-                                                                   panies  for  developing  data  centres
            ronment marked by geopolitical ten-                                                                   in  India,  and  infrastructural  invest-
            sions,  trade  disruptions  and  volatile                                                             ments to the tune of US$250 billion
            export markets.                                                                                       committed till 2047 in the India AI
                The  Reserve  Bank  of  India’s                                                                   Summit  2026  augur  well  for  attract-
            (RBI)  Annual  Report  2025-26  of-                                                                   ing FDI,” the RBI said.
            fers a revealing picture of both the                                                                      Foreign  direct  investment  is  in-
            strengths  and  vulnerabilities  of  the                                                              creasingly seen as a solution not only
            Indian economy. Its assessment sug-                                                                   for bringing capital into the economy
            gests that India’s external sector re-                                                                but also for facilitating technology
            mains resilient, yet sustaining growth                                                                transfer, innovation and productivity
            will require careful management of   The RBI believes that the conclusion and implementation of ongoing bilateral and regional   improvements.
            emerging risks and a continued push        trade agreements can improve export competitiveness (ANI file photo)   Similarly,  the  liberalisation  of
            for structural reforms.                                                                               foreign  direct  investment  norms  in
                One of the most significant chal-  dia’s economic model.        have played a major role in support-  the  space  sector  represents  another
            lenges  confronting  the  Indian  econ-  The  central  bank  remains  opti-  ing  household  incomes  and  foreign   attempt to attract global capital and
            omy  is  uncertainty  in  global  trade.  mistic about future prospects in this   exchange reserves. A broader remit-  expertise. By allowing up to 100 per
            The  RBI  notes  that  merchandise   area. “Robust global IT spending, as   tance  base  reduces  dependence  on   cent  FDI  in  satellite  manufacturing
            exports  remain  vulnerable  to  ongo-  projected by Gartner, bodes well for   any single region and provides great-  and related components, India hopes
            ing  geopolitical  conflicts  and  global   India’s software services exports,” the   er resilience against economic shocks   to position itself as a significant play-
            policy  instability.  As  supply  chains   report states. This reflects a broader   abroad.           er  in  the  rapidly  expanding  global
            are reshaped and international trade   shift  in  the  Indian  economy,  where   Yet relying on remittances alone   space economy.
            patterns become more unpredictable,  digital  services  and  technology-en-  cannot be a long-term development   Trade  agreements  are  another
            export-dependent  sectors  face  the   abled  businesses  are  becoming  key   strategy.  The  larger  challenge  re-  critical part of the solution. The RBI
            prospect of slower growth and fluctu-  drivers of growth.           mains  creating  sufficient  high-qual-  believes that the conclusion and im-
            ating demand.                         The challenge now is ensuring   ity  jobs  within  India  to  absorb  the   plementation  of  ongoing  bilateral
                This challenge is particularly im-  that India can continue to maintain   country’s expanding workforce while   and  regional  trade  agreements  can
            portant because merchandise exports   its competitive edge in these sectors.  maintaining income growth.  improve  export  competitiveness,  re-
            continue to play a critical role in gen-  Global  competition  in  technology   To  address  some  of  these  chal-  duce import dependence and expand
            erating  employment  and  foreign  ex-  services  is  intensifying,  and  sustain-  lenges,  policymakers  are  placing   investment opportunities. Successful
            change earnings. A prolonged period   ing  growth  will  require  continuous   greater  emphasis  on  attracting  for-  execution of these agreements could
            of global uncertainty could reduce de-  investments in skills, innovation and   eign  investment  and  strengthening   help Indian companies access larger
            mand for Indian goods and put pres-  digital infrastructure.        domestic  manufacturing  capabilities.  markets  and  strengthen  integration
            sure on the country’s external balance.  Another  important  pillar  sup-  The RBI points to several initiatives   with global value chains.
                However, India’s services sector   porting  India’s  external  stability  is   that could support this objective.  Ultimately, the RBI’s assessment
            is increasingly acting as a stabilising   remittance inflows from overseas In-  Among them are the Union Bud-  presents a picture of an economy at a
            force. According to the RBI, net ser-  dians. The RBI expects steady inward   get  2026-27  measures  offering  tax   crossroads. India’s traditional vulner-
            vices  exports  grew  by  15.3  per  cent   remittances from non-Gulf countries   holidays and safe-harbour provisions   abilities—external shocks, export un-
            year-on-year during April-December   to  continue  supporting  the  current   for  foreign  companies  developing   certainty and geopolitical risks—have
            2025. Software and business services   account balance during 2026-27.  data  centres  in  India.  These  initia-  not  disappeared.  Yet  new  strengths
            alone accounted for 77.8 per cent of   This  trend  reflects  the  growing   tives are expected to make the coun-  are emerging in the form of software
            the  country’s  total  services  exports,  geographical  diversification  of  In-  try more attractive for global technol-  exports, business services, diversified
            highlighting the growing importance   dia’s  diaspora  earnings.  Traditional-  ogy investments.      remittance  inflows,  technology  in-
            of knowledge-based industries in In-  ly,  remittances  from  Gulf  countries   The  report  also  highlights  infra-  vestments and strategic reforms.

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