India's Q4 current account surplus shrinks to USD 7.1 bn as trade deficit widens

India's current account surplus nearly halved to USD 7.1 billion in the March quarter of 2025-26 as a widening merchandise trade deficit offset robust growth in services exports and remittance inflows, according to data released by the Reserve Bank of India (RBI) on Monday.

The current account surplus stood at USD 7.1 billion, equivalent to 0.7% of GDP, in the January-March quarter of FY26 compared with USD 13.7 billion, or 1.4% of GDP, in the corresponding period a year ago.

The moderation in the surplus came primarily on account of a sharp increase in the merchandise trade deficit, which widened to USD 83.4 billion during the quarter from USD 59.3 billion in the year-ago period.

Providing a cushion to the external sector, net services receipts rose to USD 60.4 billion in the fourth quarter from USD 53.3 billion a year earlier.

“Services exports have risen on a year-on-year basis in major categories such as computer services and other business services,” the RBI said.

Personal transfer receipts under the secondary income account, mainly representing remittances by Indians employed overseas, rose to USD 43.5 billion in Q4 2025-26 from USD 33.9 billion a year ago.

Meanwhile, net outgo under the primary income account, largely reflecting investment income payments, declined to USD 11.1 billion from USD 11.9 billion a year ago.

Foreign direct investment (FDI) recorded a net inflow of USD 4.2 billion during the quarter, much higher than the USD 0.4 billion inflow recorded a year earlier.

Foreign portfolio investors (FPIs), however, remained net sellers, with outflows increasing to USD 12 billion during the quarter from USD 5.9 billion in the same period last year.

The RBI further said that non-resident deposits (NRI deposits) recorded a net inflow of USD 3.3 billion compared to USD 2.8 billion in Q4 2024-25.

Net inflows under external commercial borrowings (ECBs) moderated to USD 3.6 billion from USD 7.5 billion.

"Foreign exchange reserves increased by USD 7.2 billion (on a BoP basis) in Q4 2025-26 as compared to an accretion of USD 8.8 billion in Q4 2024-25," it added.

For the full financial year 2025-26, India's current account deficit stood at USD 25.2 billion, or 0.6% of GDP, compared with USD 22.9 billion, also 0.6% of GDP, in 2024-25.

The RBI said net invisibles receipts, comprising services, remittances and income flows, increased to USD 312 billion during FY26 from USD 264 billion in the previous year, largely driven by higher services earnings and personal transfers.

Net FDI inflows during FY26 rose to USD 6.9 billion from USD 1 billion a year ago, while FPIs recorded net outflows of USD 16.4 billion as against net inflows of USD 3.6 billion in FY25.

Foreign exchange reserves, on a BoP basis, declined by USD 23.6 billion during FY26 compared with a depletion of USD 5 billion in the preceding fiscal, according to the RBI data.