Services surplus narrows, FM flags capital outflow risk

Net services exports fell 10% year-on-year to $16.9 billion in September 2026, according to an ICICI Bank report, as services imports grew 8.9% while exports slipped 0.9%. The narrowing of the services trade surplus, traditionally a cushion against India's merchandise trade deficit, is a growing concern. Cumulative net services exports for April-September rose 4% to $103 billion, but the September figures remain provisional.

Finance Minister Nirmala Sitharaman flagged sustained capital outflows as a key risk for 2027, noting the ease of exit amid excess liquidity contributed to an almost 12% decline in equity benchmarks in 2026. Foreign portfolio investors sold over $33 billion of Indian equities this year, while Taiwan and South Korea attracted AI-driven flows. Meanwhile, global container freight rates have surged 130% since February 2026 due to Middle East tensions, according to Jefferies, though India’s containerised trade rose 23% in September.

India’s merchandise exports grew 18.51% to $259.89 billion in April-September, led by a 56% jump to ASEAN and 47% to Africa, Commerce Ministry data showed. The Reserve Bank of India has raised benchmark interest rates amid generalised inflation and a drought declaration across parts of Maharashtra, Karnataka and Andhra Pradesh.