India's balance of payments (BOP) swung from a surplus of $0.5 billion in April 2025 to a deficit of $6.6 billion in April 2026, even as the current account moved into surplus during the period, according to the Times of India. The sharp reversal was driven by a deterioration in the capital account, which shifted to a deficit of $11.3 billion from a surplus of $5.3 billion a year earlier, reflecting heavy selling by foreign portfolio investors and a reversal in banking capital flows.
Current Account Surplus Supported by Remittances and Services
The current account recorded a surplus of $4.7 billion in April 2026, compared with a deficit of $4.8 billion in the same month of 2025, driven by strong inflows in invisibles. Net transfers, which consist largely of worker remittances, rose by $6.6 billion to $16 billion from $9.4 billion, reflecting higher remittance inflows in the wake of the West Asia conflict and rupee depreciation, the report said.
The services surplus also increased by $2.7 billion to $18.6 billion, supported by a rise in services exports from $32.8 billion to $37 billion. Meanwhile, the primary income deficit narrowed by $1.1 billion to $1.9 billion. These gains helped offset a wider merchandise trade deficit, which increased to $27.9 billion from $27.1 billion.
Capital Account Deterioration and FPI Outflows
The overall balance turned negative due to a sharp deterioration in the capital account. Foreign portfolio investor (FPI) outflows widened significantly to $8.7 billion from $2.1 billion, indicating heavy selling by overseas investors. Banking capital reversed to an outflow of $3.7 billion from an inflow of $3.3 billion, further pressuring the capital account.
| Item | April 2025 | April 2026 | Change |
|---|---|---|---|
| Balance of payments | $0.5 billion surplus | $6.6 billion deficit | -$7.1 billion |
| Current account | $4.8 billion deficit | $4.7 billion surplus | +$9.5 billion |
| Net transfers | $9.4 billion | $16 billion | +$6.6 billion |
| Services surplus | $15.9 billion | $18.6 billion | +$2.7 billion |
| Merchandise trade deficit | $27.1 billion | $27.9 billion | +$0.8 billion |
| Capital account | $5.3 billion surplus | $11.3 billion deficit | -$16.6 billion |
| FPI outflows | $2.1 billion | $8.7 billion | +$6.6 billion |
| Banking capital | $3.3 billion inflow | $3.7 billion outflow | -$7.0 billion |
Banking Capital Reversal Adds to Pressure
The banking capital account reversed sharply to an outflow of $3.7 billion from an inflow of $3.3 billion, according to the Times of India. This reversal, combined with heavy FPI selling, pushed the capital account into a deficit of $11.3 billion, overwhelming the current account surplus.
Implications for Investors and Markets
The data underscores the significant impact of foreign fund flows on India's external accounts. The heavy selling by overseas investors, reflected in FPI outflows of $8.7 billion, signals a shift in sentiment that could affect equity market liquidity and valuations. The reversal in banking capital also highlights reduced confidence in the financial sector. For corporate treasurers and investors, the BOP deficit may lead to increased volatility in the rupee and higher hedging costs. The Times of India report noted that the current account surplus was supported by remittances and services, but the capital account deterioration remains a key risk for macroeconomic stability.
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