Foreign investment revival signals confidence in Indian economy: RBI’s State of the Economy article

India has sustained its growth momentum despite global headwinds, with economic activity remaining steady through June

The recovery in foreign investment in recent months reflects renewed confidence in the economy, despite the ongoing conflict in West Asia and elevated crude oil prices, said a study by the Reserve Bank of India (RBI). Foreign portfolio outflows have tapered off and the markets saw inflows in the recent past.

“The global economy is dealing with an uncertain economic environment, supply chain disruptions and fragmented trading relationships,” the RBI said in its State of the Economy article published in its monthly bulletin. According to the article authored by RBI researchers, India has sustained its growth momentum despite global headwinds, with economic activity remaining steady through June and indicators pointing to resilience in the industrial and services sectors.

The recent operationalisation of the India-UK Comprehensive Economic and Trade Agreement, along with progress on other bilateral trade agreements, is expected to further support this momentum. “External vulnerability indicators also remained sound. Recovery of foreign investments in recent months shows a revival of confidence in the economy,” the article said.

The RBI sold a net $6.1 billion in the foreign exchange market in May, data released on Wednesday showed, following a sharp rise in oil prices amid the Iran war that pushed the rupee to an all-time low. The central bank purchased $22.2 billion and sold $28.3 billion during the month. In April, it had sold a net $8.9 billion, according to the RBI’s July bulletin.

The country’s foreign exchange reserves remain comfortable, providing cover for more than 10 months of goods imports and around 88.5% of the external debt outstanding as at end-March 2026.

“Headline retail inflation inched up in June while core inflation, especially excluding precious metals remained low. Liquidity conditions improved further, supporting the ongoing robust credit growth. India’s external sector remains steady with improving outlook, aided by inflows of foreign investments,” it said.

Demand, industry and services keep growth momentum intact

The study said the domestic economy continued to remain buoyant in June. Demand conditions remained healthy, supported by a pickup in rural demand and firm urban demand. High frequency indicators suggest robust industrial performance and a resilient services sector.

The high-frequency indicators for June suggest sustained economic activity. Industrial growth remained strong, and the services sector showed resilience, the RBI article said. Aggregate Demand High-frequency indicators reflected strong economic activity in June. E-way bills continued to achieve double-digit growth, it said.

According to the article, the farm sector is witnessing uneven southwest monsoon, but the impact on food inflation may be mitigated by comfortable foodgrain stocks. “The momentum of external trade sustained as reflected in high growth in exports and imports in Q1 of 2026-27,” it said.

There has been a delayed kharif sowing due to the uneven progress in southwest monsoon amid the prevailing El Niño conditions. “High public foodgrain stocks should provide some cushion against price pressures. The momentum in external trade sustained as reflected in high growth in exports and imports in Q1 2026-27,” it said.

George Mathew is an Associate Editor with The Indian Express, based in Mumbai. A veteran of financial journalism with nearly three decades of experience, he is one of the country’s most authoritative voices on banking, regulation, and the corporate sector. Expertise & Focus Areas Mathew’s reporting covers the nerve center of India’s economy. His specialized beats include: The Reserve Bank of India (RBI): He has tracked the central bank's policy evolution through the tenures of multiple Governors, offering deep insights into monetary policy, repo rates, and banking regulation. Banking & Insurance: Extensive coverage of public and private sector banks, non-performing assets (NPAs), and key legislative reforms like the Insurance Amendment Bills. Corporate Affairs: Mathew frequently breaks major stories related to India's largest conglomerates, with a specific focus on the Tata Group, documenting boardroom shifts and strategic decisions. Financial Markets: Reporting on the complexities of Foreign Portfolio Investors (FPIs), IPOs, and currency fluctuations. Authoritativeness & Insight With a career dating back to the late 1990s, Mathew possesses a rare institutional memory of India’s financial liberalization and market crises. His work is not limited to daily news; he frequently contributes to the "Explained" section, where he decodes complex financial legislations and market trends for a broader audience. His rigorous reporting has also been featured in scholarly platforms like the Economic and Political Weekly (EPW). Find all stories by George Mathew here ... Read More

The recovery in foreign investment in recent months reflects renewed confidence in the economy, despite the ongoing conflict in West Asia and elevated crude oil prices, said a study by the Reserve Bank of India (RBI). Foreign portfolio outflows have tapered off and the markets saw inflows in the recent past.

“The global economy is dealing with an uncertain economic environment, supply chain disruptions and fragmented trading relationships,” the RBI said in its State of the Economy article published in its monthly bulletin. According to the article authored by RBI researchers, India has sustained its growth momentum despite global headwinds, with economic activity remaining steady through June and indicators pointing to resilience in the industrial and services sectors.

The recent operationalisation of the India-UK Comprehensive Economic and Trade Agreement, along with progress on other bilateral trade agreements, is expected to further support this momentum. “External vulnerability indicators also remained sound. Recovery of foreign investments in recent months shows a revival of confidence in the economy,” the article said.

The RBI sold a net $6.1 billion in the foreign exchange market in May, data released on Wednesday showed, following a sharp rise in oil prices amid the Iran war that pushed the rupee to an all-time low. The central bank purchased $22.2 billion and sold $28.3 billion during the month. In April, it had sold a net $8.9 billion, according to the RBI’s July bulletin.

The country’s foreign exchange reserves remain comfortable, providing cover for more than 10 months of goods imports and around 88.5% of the external debt outstanding as at end-March 2026.

“Headline retail inflation inched up in June while core inflation, especially excluding precious metals remained low. Liquidity conditions improved further, supporting the ongoing robust credit growth. India’s external sector remains steady with improving outlook, aided by inflows of foreign investments,” it said.

Demand, industry and services keep growth momentum intact

The study said the domestic economy continued to remain buoyant in June. Demand conditions remained healthy, supported by a pickup in rural demand and firm urban demand. High frequency indicators suggest robust industrial performance and a resilient services sector.

The high-frequency indicators for June suggest sustained economic activity. Industrial growth remained strong, and the services sector showed resilience, the RBI article said. Aggregate Demand High-frequency indicators reflected strong economic activity in June. E-way bills continued to achieve double-digit growth, it said.

According to the article, the farm sector is witnessing uneven southwest monsoon, but the impact on food inflation may be mitigated by comfortable foodgrain stocks. “The momentum of external trade sustained as reflected in high growth in exports and imports in Q1 of 2026-27,” it said.

There has been a delayed kharif sowing due to the uneven progress in southwest monsoon amid the prevailing El Niño conditions. “High public foodgrain stocks should provide some cushion against price pressures. The momentum in external trade sustained as reflected in high growth in exports and imports in Q1 2026-27,” it said.