India’s external sector outlook received mixed signals in the Economic Survey 2025–26, presented in Parliament on January 29, 2026. While recent and prospective Free Trade Agreements (FTAs) are expected to expand export opportunities, the Survey flagged concerns that stricter immigration policies in key destination countries could slow remittance growth, potentially dampening a major source of foreign exchange for India.
According to the Survey, bilateral trade deals with partners such as the United Kingdom, Oman, New Zealand and the European Union — alongside ongoing negotiations with the United States — are expected to support India’s export diversification and deepen market access for labour-intensive goods. These agreements are seen as reinforcing India’s integration into global value chains and enhancing competitiveness across sectors.
However, the Survey warned that tightening immigration norms in several advanced economies — nations that traditionally host large numbers of Indian migrant workers — may cap growth in inward remittances. These remittances, sent home by Indian expatriates, have historically formed a significant and stable source of foreign exchange, helping to cushion the current account and support domestic consumption.
“A proliferation of immigration controls across countries typically favoured by Indian emigrants may cap the growth in remittances,” the Economic Survey noted, highlighting an emerging risk to the medium-term external sector outlook.
Despite these challenges, the Survey emphasised that India’s external sector remains comfortably placed in the short run, underpinned by robust foreign exchange reserves and manageable external debt levels. Policymakers are expected to balance efforts to accelerate export growth through trade agreements with measures to better integrate the diaspora into formal financial systems to sustain remittance flows.