The recently concluded India-EU free trade agreement (FTA) and the prospective India-US trade deal, along with several other trade agreements, will support exports over the medium-term, RBI Governor Sanjay Malhotra said on Friday.

Services exports should remain resilient, he said during the RBI MPC meeting which kept the key policy rate unchanged.

However, “the spillovers emanating from geopolitical tensions, volatility in international financial markets and shifting trade patterns pose risks to the outlook,” the RBI Governor added.

On the demand side, the momentum in private consumption is expected to sustain in 2026-27. Rural demand remains steady, with improving agricultural activity and rural labour market conditions.

“Recovery in urban consumption should further strengthen with continued support from GST rationalisation and monetary easing. High-capacity utilisation, accelerating bank credit, conducive financial conditions, and government’s continued emphasis on infrastructure should give an impetus to investment activity,” said Malhotra.

He further stated that several measures announced in the Union Budget should also be conducive for growth.

Going forward, economic activity is expected to hold up well in 2026-27. Agricultural activity will be supported by healthy reservoir levels, robust rabi sowing, and improvement in crop vegetation conditions.

“Improving corporate sector performance6 and sustained momentum in informal sector should boost manufacturing activity. Construction sector growth is expected to remain firm. Services sector should continue to be resilient, with strengthening domestic demand. Early results from IT firms suggest an improvement in business activity,” said Malhotra.

Moreover, the Indian economy continues on a steadily improving trajectory, with real GDP poised to register significantly higher growth of 7.4 per cent in 2025-26, as compared to the previous year.

Amid global headwinds, private consumption and fixed investment supported growth.

“Net external demand, however, remained a drag, with imports outpacing exports. On the supply side, growth in real GVA, on the back of a strong contribution from the services sector and revival in manufacturing activity, is estimated at 7.3 per cent in 2025-26,” he noted.