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India’s current account balance slipped into a deficit of $2.4 billion, or 0.2 per cent of gross domestic product (GDP), in the April–June quarter (Q1) of 2025–26 (FY26). In contrast, it had posted a surplus of $13.5 billion (1.3 per cent of GDP) in the January–March quarter (Q4) of 2024–25 (FY25), the Reserve Bank of India (RBI) said in a statement.
The current account deficit (CAD) stood at $8.6 billion (0.9 per cent of GDP) in Q1FY25, the central bank observed.
According to RBI data, the year-on-year (Y-o-Y) decline in CAD was driven by a higher services trade surplus, which rose to $47.9 billion in Q1FY26 from $39.7 billion a year ago. Services exports grew across major categories, including computer and business services. However, the merchandise trade deficit widened to $68.5 billion from $63.8 billion in the same period.
Aditi Nayar, chief economist at Icra, said: “While India’s current account expectedly reverted to a deficit in Q1FY26, the extent was considerably lower than our projection ($7 billion), at just $2.4 billion, or 0.2 per cent of GDP.”
The upside came from stronger-than-anticipated remittances, which jumped by about 18 per cent Y-o-Y in the quarter. “This augurs well, given the uncertainty ahead amid recent tariff-related developments,” Nayar added.
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Private transfer receipts, mainly representing remittances by Indians working overseas, rose to $33.2 billion in Q1FY26 from $28.6 billion in Q1FY25, RBI data showed.
The net outgo on the income account, largely reflecting investment payments, increased to $12.8 billion in Q1FY26 from $10.9 billion in Q1FY25.
On the financial account, foreign direct investment recorded a net inflow of $5.7 billion in Q1FY26, compared to $6.2 billion a year earlier. Net foreign portfolio investment inflows were higher at $1.6 billion, up from $900 million in Q1FY25.
Net external commercial borrowings into India rose to $3.7 billion in Q1FY26, against $1.6 billion a year ago.
In terms of the balance of payments, reserves grew by $4.5 billion in Q1FY26, compared to an accretion of $5.2 billion in the same period last year, the RBI said.
Looking ahead, high tariff levels may weigh on India’s exports to the US. “In this scenario, we expect overall merchandise exports to decline somewhat in FY26 from FY25 levels, and for CAD to exceed 1 per cent of GDP, while remaining moderate,” Icra said.
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