SBI Research Flags India’s Rising Exports, FY26 CAD to Stay Manageable

Updated: November 22, 2025 15:54

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India’s trade momentum remains robust despite Global economic uncertainties, with the Current Account Deficit (CAD) expected to reach nearly 1% of GDP for FY26 before improving in the final quarter. Strong export growth, especially to the US, and government export support bolster India's trade outlook for the year.

India’s foreign trade dynamics continue to show resilience amid global volatility, underpinned by steady export growth and strategic government interventions, according to recent forecasts by SBI Research. The current account deficit (CAD) for FY26 is expected to narrow to approximately 1-1.3% of GDP, reflecting a modest deficit profile before returning to surplus by the fiscal year-end.

Key highlights

- The CAD is projected to be around 1.8% of GDP in Q2 FY26, rising to 2.8% in Q3, before moving into positive territory in Q4 FY26.

- Despite a likely marginal overall balance-of-payments deficit of up to $10 billion for FY26, fears around the rupee's performance appear to be overstated, with currency weakness linked largely to external market conditions rather than structural issues.

- Merchandise exports have risen by 2.9% during April to September 2025, reaching $220 billion, with exports to the US showing an impressive 13% growth to $45 billion amid shifting trade dynamics.

- Growth areas such as marine products and ready-made garments (RMG) cotton have seen positive performance, contributing to export diversification.

- Recent government initiatives, including a ₹45,060 crore package with a component of ₹20,000 crore in credit guarantees for exporters, aim to enhance global competitiveness and support access to emerging markets.

- The rupee’s depreciation beyond 89.49 against the dollar is attributed to global market turmoil and a strengthening dollar index, not indicative of long-term structural currency weakness.

- Challenges include ongoing global trade tensions and commodity price fluctuations, though subdued oil prices may positively affect the external balance given India’s import sensitivity to crude costs.

Overall, SBI Research illustrates that although the balance of payments will show a slight deficit in FY26, India’s trade outlook remains firm, supported by strong export momentum and policy measures. The upcoming India-US Bilateral Trade Agreement is also expected to enhance export prospects over the medium term by reducing tariffs and opening further trade avenues.

Sources: SBI Research report as reported by Punjab News Express, Assam Tribune, IANS, and others.

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