India's service trade, remittances to support current account balance in FY27: RBI Annual Report

India's current account balance is expected to receive significant support in the fiscal year 2026-27, driven by a robust outlook for its services trade, especially in software and business services, and consistent inward remittances from countries outside the Gulf region. This projection comes from the Reserve Bank of India's (RBI) Annual Report 2025-26, which assesses the external sector's performance.

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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's report indicates that despite prevailing uncertainties in global trade and geopolitical developments, India's strong performance in services exports and remittance inflows will serve as a crucial buffer for its balance of payments. The central bank's optimism is notable, even as it acknowledges risks to merchandise exports stemming from ongoing geopolitical conflicts and global policy uncertainties.

To further enhance export competitiveness and reduce import reliance, the report anticipates improvements through the implementation of trade agreements with key partners and a policy focus on strengthening domestic manufacturing in strategic sectors. India's services exports have consistently been a major strength for the external sector, with net services exports growing by 15.3 percent year-on-year in April-December 2025, largely fueled by software and business services, which constitute nearly 78 percent of the country's total services exports.

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Going forward, robust global IT spending, as projected by Gartner, bodes well for India's software services exports.

Looking ahead, the report suggests that strong global IT spending, as projected by Gartner, bodes well for India's software services exports. Additionally, the RBI points to policy measures announced in the Union Budget 2026-27 designed to attract greater foreign investment. These include tax holidays and safe harbor provisions for foreign companies developing data centers in India, and substantial infrastructural investments committed until 2047. Liberalized foreign direct investment norms in the space sector, permitting up to 100 percent FDI in satellite manufacturing, are also expected to draw global capital and technology.

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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.