This week’s Economic Brief explores India’s shifting forex demand, Europe’s heat-driven business disruption, India-Japan critical minerals cooperation, and a projected $50 billion balance of payments surplus for FY27.
The Economic Brief this week, examined three major stories: the transformation of India’s retail foreign exchange market, the growing business impact of Europe’s extreme summer heat, and India’s forecast balance of payments surplus for FY27. The episode also featured Commerce Minister Piyush Goyal on India-Japan cooperation, US Ambassador Sergio Gor on India-US trade, and economist Dr. Nilanjan Banik of Mahindra University, Hyderabad.
India-Japan Cooperation on Critical Minerals
Commerce Minister Piyush Goyal highlighted that critical minerals have become a central pillar of India-Japan cooperation, alongside semiconductors, batteries, AI, and next-generation mobility. Goyal will lead a large business delegation to Japan from August 24 to 27, 2026 to deepen trade and investment ties, anchored by a commitment of 10 trillion yen in Japanese investment into India over the next decade.
India’s Forex Demand: Key Trends
The Thomas Cook India Forex Report 2026, based on transaction data from April 2025 to March 2026, revealed several shifts: Tier 2 and Tier 3 cities now drive 53% of India’s total forex demand. Millennials and Gen X dominate, with the 25-40 age group accounting for 37% of demand and the 40-60 group for 36%. Travelers aged 18-24 are the fastest adopters of digital forex, a trend expected to reshape the market.
Digital transactions account for 25% of forex purchases, while 75% still happen at physical branches. Do-it-yourself apps have grown 50% year-on-year. Purchase windows have shortened from 10-14 days before travel to just four to seven days. The US dollar remains dominant at 49%, followed by European currencies (23%), Asian currencies (11%), Gulf currencies (9%), Australia/New Zealand dollars (5%), and the Canadian dollar (3%).
Holiday travelers favor cash, while 84% of business travelers rely on forex cards; 76% of card usage is now multi-currency.
Dr. Banik linked this shift to rising incomes, digitization, manufacturing growth, and more students studying abroad, aided by visa-free access to around 56 countries and platform-based forex and ticketing services.
India-US Trade at Record Levels
US Ambassador to India Sergio Gor told Mumbai business leaders that India-US trade has grown more than twelvefold in two decades, from about $20 billion to over $240 billion, driven by deepening cooperation across AI, semiconductors, defense, and energy.
Europe’s Heatwave Reshapes Business Strategy
A Financial Times analysis found that one in ten large European companies cited heatwaves, droughts, or wildfires on recent earnings calls — the highest share ever recorded. Winners include Groupe SEB (30% jump in fan sales), Beiersdorf (record sun-protection sales), Fluidra, and cooling supplier BSH. Losers include Heijmans, where heat forced work stoppages, and Clariane, which is investing €10 million in air conditioning amid rising heat-related health admissions.
Executives are split: KSB, Saint-Gobain, Drax, and Engie see a lasting shift, while H&M, Jet2, and Ryanair view it as temporary.
Dr. Banik noted that extreme heat is likely to hurt productivity in manufacturing and agriculture while straining healthcare systems, compounding Europe’s demographic challenges — a median age above 48 and sub-replacement birth rates — which push up debt-to-GDP ratios.
India’s BOP Surplus Set to Hit $50 Billion in FY27
According to SBI Research, India’s balance of payments is projected to post a surplus of nearly $50 billion in FY27, with the current account deficit contained near 1% of GDP — a sharp reversal from a $23.6 billion deficit in FY 2025-26. The turnaround is driven largely by $56.85 billion in inflows through the RBI’s tax-free FCNR (B) deposit scheme for non-resident Indians. A stronger BOP supports currency stability and India’s credit outlook; forex reserves now stand at a record $700 billion.
Key Takeaways
India’s forex market is decentralizing toward smaller cities even as digital adoption accelerates. India-Japan and India-US ties are deepening across critical minerals, AI, and defense technology. Europe’s heat is creating both winners and losers across industries. And India’s external position is strengthening on the back of record NRI inflows and rising reserves.
