RBI governor in its December policy stated that Indias current account deficit moderated from 2.2 per cent of GDP in Q2:2024- 25 to 1.3 per cent in Q2:2025-26 on account of robust services exports and strong remittances. In October 2025, merchandise exports contracted year-on-year, whereas merchandise imports continued to increase for the second consecutive month, resulting in a widening of the trade deficit. Healthy services exports coupled with strong remittance receipts are expected to keep CAD modest during 2025-26.
On the external financing side, gross foreign direct investment (FDI) to India increased at a robust pace during the first half of the year. Net FDI also increased significantly due to a decline in repatriation despite a rise in outward FDI.22 Foreign portfolio investment (FPI) to India recorded net outflows of US$ 0.7 billion in 2025-26 so far (April-December 03), due to outflows in the equity segment. Flows under external commercial borrowings and non-resident deposit accounts moderated as compared to last year. As on November 28, 2025, Indias foreign exchange reserves stood at US$ 686.2 billion, providing a robust import cover of more than 11 months. Overall, Indias external sector remains resilient, he noted.
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