Will EU and US Trade Agreements Bolster Exports in the Medium-Term?
Synopsis
The RBI Governor highlights the positive impact of new trade agreements on India's export potential. With ongoing developments in the global market, the medium-term outlook remains promising, particularly in the services sector. Discover how these trade deals could transform the economic landscape.
Key Takeaways
India-EU FTA and India-US trade agreements expected to boost exports.
RBI expects resilience in services exports .
Private consumption momentum projected to sustain.
Investment activity to be supported by government initiatives.
Real GDP growth projected at 7.4% for 2025-26.
New Delhi, Feb 6 (NationPress) The recently finalized India-EU free trade agreement (FTA) and the anticipated India-US trade deal, alongside various other trade agreements, are expected to enhance exports over the medium-term, stated RBI Governor Sanjay Malhotra on Friday.
He emphasized that services exports should demonstrate resilience during this period, as he spoke at the RBI MPC meeting which opted to maintain the key policy rate.
However, he cautioned that “spillovers from geopolitical tensions, fluctuations in international financial markets, and changing trade patterns could pose risks to the economic outlook,” he noted.
On the demand front, the momentum in private consumption is projected to continue in 2026-27. Rural demand is showing stability, bolstered by enhancing agricultural activities and favorable rural labor market conditions.
“Urban consumption recovery is likely to gain strength, supported by ongoing GST rationalization and monetary easing. High-capacity utilization, increasing bank credit, favorable financial conditions, and the government's persistent focus on infrastructure are expected to stimulate investment activities,” Malhotra added.
He also remarked that several initiatives announced in the Union Budget should contribute positively towards economic growth.
Looking ahead, economic activity is anticipated to remain strong in 2026-27. Agricultural productivity will benefit from healthy reservoir levels, robust rabi sowing, and improved crop vegetation conditions.
“Enhanced corporate sector performance and sustained growth in the informal sector should invigorate manufacturing activities. The construction sector is expected to maintain solid growth. The services sector is likely to remain resilient, buoyed by strengthening domestic demand. Preliminary results from IT firms indicate a positive trend in business activities,” Malhotra stated.
Furthermore, the Indian economy is on a continuous path of improvement, with real GDP projected to achieve a significant growth rate of 7.4 percent in 2025-26, compared to the previous fiscal year.
Despite global challenges, the growth is being supported by private consumption and fixed investments.
“Nevertheless, net external demand has remained a hindrance, with imports surpassing exports. On the supply side, growth in real GVA, fueled by a strong contribution from the services sector and a revival in manufacturing, is estimated at 7.3 percent in 2025-26,” he concluded.
Point of View
It is essential to recognize the strategic importance of the India-EU and India-US trade agreements. These developments could significantly bolster India's export capabilities, despite the challenges posed by global market fluctuations. The outlook is cautiously optimistic, and continued vigilance is necessary to navigate potential risks. We must remain committed to supporting these agreements for the nation's economic growth.
NationPress
12 May 2026
Frequently Asked Questions
What is the significance of the India-EU FTA?
The India-EU FTA is expected to enhance trade relations and support exports between India and the European Union, facilitating economic growth.
How will the India-US trade deal affect exports?
The anticipated India-US trade deal is projected to bolster India's exports, providing new market opportunities and improving trade dynamics.
What risks did RBI Governor Malhotra mention?
He highlighted risks such as geopolitical tensions, volatility in international financial markets, and changing trade patterns that could impact the economic outlook.
What factors are contributing to private consumption growth?
Factors include steady rural demand, improving agricultural activity, and favorable conditions in the rural labor market.
What is the projected GDP growth for 2025-26?
The real GDP is anticipated to grow by 7.4 percent in 2025-26, indicating a strong economic performance.
