Archive · 1 Oct 2026
India Warned Growth Cannot Offset Rising Global Capital Challenges
India’s economy is growing quickly, but the government says it cannot become careless.
Other countries are competing strongly to attract investors and factories.
Unsettled trade relations with the United States could make it harder for India to receive money from abroad.
Investment in artificial intelligence is also drawing money around the world.
Higher oil prices and global borrowing costs are creating additional pressure.
Even so, India’s exports, domestic demand and bank lending remain strong.
Foreign investment increased during the first four months of the fiscal year.
The government says large foreign-exchange reserves help protect India from outside shocks.
It also says growth must be maintained quarter after quarter.
The finance ministry said India faces stiff competition for capital amid unsettled US trade ties, AI investment and developed-economy manufacturing drives.
India’s economy grew 7.8% in the June quarter, while the ministry projects 7.3% growth for the second quarter of FY27.
Net FDI rose 38% year-on-year to $13.4 billion between April and July, with gross inflows reaching $43.9 billion.
Exports exceeded $400 billion in the first five months of FY27 and could reach $1 trillion during the fiscal year.
Foreign-exchange reserves stood at $765.9 billion on September 18, providing a buffer against external-sector vulnerabilities.
- Who
- India’s finance ministry and the Indian economy are at the center of the review.
- What
- The ministry warned that India faces tougher competition for foreign capital despite resilient growth and rising investment inflows.
- When
- The review was issued on Thursday and covers September; it discusses developments in FY27, including April-to-July and June-quarter data.
- Where
- India, amid changing global trade, investment and financial conditions.
- Why
- Unsettled trade ties with the United States, global artificial-intelligence investment, developed-economy manufacturing efforts, higher oil prices and rising bond yields are challenging capital inflows.
Resilience and growth
External risks and caution
Economic momentum
Resilience and growth
The ministry said domestic demand, investment, exports, services activity, electricity use and bank credit show that growth remains resilient.
External risks and caution
The ministry also said high-frequency indicators are mixed, with slower e-way bill generation and manufacturing PMI growth.
Foreign capital
Resilience and growth
Net FDI increased 38% year-on-year, and strong inflows and banking capital supported the balance of payments.
External risks and caution
India faces a stiff challenge attracting capital as investors respond to unsettled US trade ties, the global AI investment cycle and manufacturing competition from developed economies.
External protection
Resilience and growth
Foreign-exchange reserves of $765.9 billion and measures securing energy and critical inputs provide protection against external shocks.
External risks and caution
Higher oil prices, rising global bond yields, weather-related volatility and pressure on the rupee could continue to challenge the economy.
- June-quarter growth
- Real GDP growth was 7.8%.
- Second-quarter forecast
- The ministry’s nowcast projects 7.3% real GDP growth for the fiscal second quarter of FY27.
- Net FDI
- Net foreign direct investment rose 38% year-on-year to $13.4 billion between April and July.
- Gross FDI
- Gross FDI inflows totaled $43.9 billion between April and July.
- Exports
- Merchandise and services exports exceeded $400 billion in the first five months of FY27 and may reach $1 trillion during the fiscal year.
- Foreign-exchange reserves
- Reserves were $765.9 billion as of September 18.
- Inflation
- About 69% of items in the retail price gauge had inflation below the 4% medium-term target.