Recovery of Foreign Investments in India Shows Revival of Confidence: RBI July Bulletin
Strong industrial activity, services growth and recovering foreign investment support outlook
Mumbai: Amid global economic uncertainties, supply chain disruptions, and fragmented trading relationships, India remains among the fastest-growing major economies. The country has been able to sustain the momentum in economic activities through June, with both industrial and services sector indicators remaining firm said the central bank in its July Bulletin released on Wednesday.
The RBI in an article 'State of the Economy' in the Bulletin, noted that a recovery of foreign investments in recent months shows a revival of confidence in the Indian economy.
The central bank said that while the farm sector is witnessing uneven southwest monsoon, the impact on food inflation may be mitigated by comfortable foodgrain stocks.
It further said the momentum of external trade sustained as reflected in high growth in exports and imports in Q1 of 2026-27.
This is likely to be strengthened by the recent operationalisation of the India-UK Comprehensive Economic and Trade Agreement (CETA) and progress in other bilateral trade agreements, it added.
Foreign portfolio investments saw net inflows in June 2026, driven by policy support for the debt segment and easing of geopolitical tensions, it said.
In July (up to July 20), FPIs infused USD 3.1 billion into the equity and debt segments. During April-May 2026, FDI remained higher in both gross and net terms, supported by lower repatriation.
Japan, Singapore and Mauritius accounted for around 74 per cent of the total equity inflows. Financial services received the highest share of equity inflows, followed by manufacturing, retail and wholesale trade, and computer services. These sectors together accounted for around 80 per cent of total inflows.
Of the outward FDI, the article said around 74 per cent of the flows were directed towards the US, Cayman Islands, and the Netherlands. The major sectors included financial, insurance and business services and manufacturing, accounting for more than 85 per cent of the outward flows during April-May 2026.
The RBI data showed that it sold a net $6.1 billion in the foreign exchange market in May, a time when the rupee crossed 96 levels against the dollar due to high oil prices.
The RBI said that it purchased $22.2 billion and sold $28.3 billion in May. In April, the central bank had sold a net $8.9 billion. The Indian rupee fell to a record low of 96.96 per dollar on May 20 due to persistent FII outflows, elevated crude prices, and safe‑haven demand for the dollar amid global risk‑off sentiment.
The RBI's net outstanding forward dollar sales stood at a record $106.6 billion as of end-May, compared with $95.3 billion at the end of April.
The data also showed that the central bank's gold holdings have remained unchanged since May 22 at 880.52 metric tonnes.
On Wednesday, the rupee slipped 32 paise to close at 96.56 amid a surge in crude oil prices and rising geopolitical uncertainty. Fresh concerns around U.S. tariff rhetoric also weighed on sentiment.
