RBI policy meeting: India-EU FTA to support exports over medium term, says Sanjay Malhotra

RBI Governor Sanjay Malhotra

• India's external position strengthened by trade deals, exports, and remittances
• RBI raises FY26 GDP forecast to 7.4%, keeps repo rate at 5.25%
• Foreign exchange reserves at $723.8 billion, covering over 11 months of imports

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Recent trade agreements, robust services exports and healthy remittances have strengthened India’s external position despite global uncertainties, Reserve Bank of India (RBI) Governor Sanjay Malhotra said on February 6, sharing the outcome of the first policy review of 2026.

The recently concluded India-EU free trade agreement (FTA) and the India-US pact, along with several other bilateral and regional agreements, are expected to support exports over the medium term, Malhotra said, sharing the outlook for the economy.

“Services exports should remain resilient and spillovers from geopolitical tensions, volatility in international financial markets and shifting trade patterns are being closely monitored,” he added.

The RBI raised the full year GDP forecast for FY26 by 10 basis points to 7.4 percent from 7.3 percent earlier even as it held the key repo rate steady at 5.25 percent.

The RBI deferred its projections for FY27 to April policy to incorporate the new GDP series.

Malhotra pointed to India’s merchandise exports, which grew 1.9 percent year-on-year, because of trade diversification efforts.

The combination of resilient merchandise exports, robust services inflows, and healthy inward remittances has helped moderate the trade deficit and strengthen India’s current account position.

These trends signal a moderate and sustainable external sector.

“Our efforts in pursuing bilateral and regional trade agreements with major partners are expected to facilitate international trade and investment, diversify trading partners, and integrate India further into global value chains,” he said.

On FDI

On foreign investment, Malhotra said cross-border FDI inflows increased at a robust pace from April to November, while net FDI rose as India emerged as a preferred destination for projects.

Despite some moderation, foreign portfolio investment (FPI) recorded a net outflow of $5.8 billion till February 3.

India’s foreign exchange reserves stood at a very healthy $723.8 billion on January 30, providing more than 11 months of merchandise import cover. “Overall, India’s external sector remains resilient, and we are confident of meeting our external financing requirements,” Malhotra said.