This week’s Economic Brief examines India’s shifting foreign‑exchange demand, the business impact of Europe’s extreme heat, the deepening India‑Japan collaboration on critical minerals, and a forecast $50 billion balance‑of‑payments surplus for FY 27.
The brief covers three key themes: the transformation of India’s retail foreign‑exchange market, the mounting business effects of Europe’s extreme summer heat, and India’s projected FY 27 balance‑of‑payments surplus. It also includes insights from Commerce Minister Piyush Goyal on India‑Japan ties, U.S. Ambassador Sergio Gor on India‑U.S. trade, and economist Dr. Nilanjan Banik of Mahindra University, Hyderabad.
India-Japan Cooperation on Critical Minerals
Commerce Minister Piyush Goyal said critical minerals now form a central pillar of India‑Japan cooperation, alongside semiconductors, batteries, AI, and next‑generation mobility. He will lead a sizable business delegation to Japan from August 24‑27, 2026 to deepen trade and investment, backed by a pledge of 10 trillion yen in Japanese investment into India over the next ten years.
India’s Forex Demand: Key Trends
The Thomas Cook India Forex Report 2026, covering transactions from April 2025 through March 2026, shows several shifts: Tier 2 and Tier 3 cities now account for 53 % of India’s total foreign‑exchange demand. Millennials and Gen X lead, with the 25‑40 age group contributing 37 % and the 40‑60 group 36 %. Travelers aged 18‑24 are the quickest adopters of digital forex, a trend poised to reshape the market.
Digital channels now represent 25 % of forex purchases, with the remaining 75 % still conducted at physical branches. DIY apps have surged 50 % year‑on‑year, and the typical purchase window has shrunk from 10‑14 days before travel to just four‑to‑seven days. The U.S. dollar stays dominant at 49 %, followed by European currencies (23 %), Asian currencies (11 %), Gulf currencies (9 %), Australia/New Zealand dollars (5 %), and the Canadian dollar (3 %).
Leisure travelers tend to prefer cash, whereas 84 % of business travelers use forex cards, and 76 % of those card transactions are multi‑currency.
Dr. Banik attributes this shift to rising incomes, broader digitization, manufacturing expansion, and an increasing number of students studying abroad—facilitated by visa‑free access to roughly 56 countries and the growth of platform‑based forex and ticketing services.
India-US Trade at Record Levels
U.S. Ambassador to India Sergio Gor informed Mumbai business leaders that India‑U.S. trade has expanded more than twelvefold over the past two decades—from roughly $20 billion to over $240 billion—propelled by deepening collaboration in AI, semiconductors, defense, and energy.
Europe’s Heatwave Reshapes Business Strategy
A Financial Times analysis reveals that one in ten large European companies mentioned heatwaves, droughts, or wildfires on recent earnings calls—the highest proportion ever recorded. Winners comprise Groupe SEB (a 30 % jump in fan sales), Beiersdorf (record sun‑protection sales), Fluidra, and cooling‑equipment provider BSH. Losers include Heijmans, where heat halted work, and Clariane, which is earmarking €10 million for air‑conditioning upgrades amid climbing heat‑related health admissions.
Opinions among executives are divided: KSB, Saint‑Gobain, Drax, and Engie regard the impact as a lasting shift, whereas H&M, Jet2, and Ryanair consider it temporary.
Dr. Banik warned that extreme heat could depress productivity in manufacturing and agriculture while burdening healthcare systems, exacerbating Europe’s demographic headwinds—a median age over 48 and sub‑replacement fertility rates—that in turn lift debt‑to‑GDP ratios.
India’s BOP Surplus Set to Hit $50 Billion in FY27
SBI Research projects that India’s balance of payments will post a surplus of close to $50 billion in FY 27, with the current account deficit held near 1 % of GDP—a marked reversal from the $23.6 billion deficit recorded in FY 2025‑26. The improvement stems mainly from $56.85 billion of inflows via the RBI’s tax‑free FCNR (B) deposit scheme for non‑resident Indians. A stronger BOP bolsters currency stability and India’s credit outlook, and foreign‑exchange reserves have risen to a record $700 billion.
Key Takeaways
India’s foreign‑exchange market is decentralizing toward smaller cities even as digital adoption accelerates. India‑Japan and India‑U.S. ties are deepening across critical minerals, AI, and defense technology. Europe’s heat is producing both winners and losers across industries. Meanwhile, India’s external position is strengthening on the back of record NRI inflows and swelling reserves.
