India recorded a current account surplus of $7.1 billion (0.7% of GDP) in the January–March quarter of financial year 2025-26, the Reserve Bank of India (RBI) reported on Monday. The surplus was driven by a sharp rise in services exports and remittances from overseas Indians, even as the merchandise trade deficit expanded. In the same quarter of FY25, the surplus had stood at $13.7 billion (1.4% of GDP), according to PTI.
Quarterly Performance: Services and Remittances Offset Trade Gap
The merchandise trade deficit widened to $83.4 billion in Q4 FY26 from $59.3 billion a year earlier, the RBI said. However, net services receipts rose to $60.4 billion from $53.3 billion, with year-on-year growth in computer services and other business services. Personal transfer receipts — mainly remittances by Indians working overseas — increased to $43.5 billion from $33.9 billion. Net outgo under the primary income account, which largely reflects investment income payments, declined to $11.1 billion from $11.9 billion.
| Component | Q4 FY26 | Q4 FY25 | Change |
|---|---|---|---|
| Current account balance | $7.1 billion (0.7% of GDP) | $13.7 billion (1.4% of GDP) | -$6.6 billion |
| Merchandise trade deficit | $83.4 billion | $59.3 billion | +$24.1 billion |
| Net services receipts | $60.4 billion | $53.3 billion | +$7.1 billion |
| Personal transfers (remittances) | $43.5 billion | $33.9 billion | +$9.6 billion |
| Net FDI inflows | $4.2 billion | $0.4 billion | +$3.8 billion |
| Net FPI inflows | $12.0 billion | -$5.9 billion | +$17.9 billion |
| NRI deposits (net inflows) | $3.3 billion | $2.8 billion | +$0.5 billion |
| Foreign exchange reserves change (BoP) | +$7.2 billion | +$8.8 billion | -$1.6 billion |
Full-Year Trends: Deficit Widens on Weaker Capital Flows
For the full financial year 2025-26, the current account deficit widened to $25.2 billion (0.6% of GDP) from $22.9 billion (0.6% of GDP) in FY25. Net invisible receipts — comprising services, primary income, and secondary income — rose to $312 billion from $264 billion, driven by higher net services receipts and personal transfers.
On the capital account, net FDI inflows for the full year stood at $6.9 billion. However, foreign portfolio investors (FPIs) recorded net outflows of $16.4 billion during FY26, compared with net inflows of $3.6 billion in FY25. Non-resident Indian (NRI) deposits registered net inflows of $3.3 billion in Q4, higher than $2.8 billion in the year-ago period.
Capital Flows and Reserve Position
Foreign direct investment (FDI) posted a net inflow of $4.2 billion in Q4 FY26, compared with just $0.4 billion in Q4 FY25. FPIs turned around sharply, recording net inflows of $12 billion in the January–March quarter against net outflows of $5.9 billion a year earlier, according to RBI data. India's foreign exchange reserves increased by $7.2 billion on a balance of payments (BoP) basis in Q4, compared with an accretion of $8.8 billion in Q4 FY25. For the full year, reserves declined by $23.6 billion on a BoP basis, versus a depletion of $5 billion in FY25.
Implications for Investors and Corporates
The Q4 surplus, while narrower than a year ago, underscores the resilience of India's services export sector and the steady flow of remittances. The widening merchandise trade deficit, however, signals continued import demand, particularly for goods. The strong rebound in FPI inflows in Q4 suggests renewed foreign investor confidence after a period of outflows. For corporate strategists and investors, the data points to robust external sector fundamentals in the near term, though the full-year deficit and reserve drawdown warrant monitoring. The RBI's next monetary policy review will be watched for any implications on interest rates and forex management.
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