India’s current account deficit (CAD) increased to $13.2 billion or 1.3% of the gross domestic product in Q3 2025-26 from $11.3 billion (1.1%) in the year-ago period mainly due to a higher merchandise trade deficit, according to data released by the Reserve Bank of India (RBI) on Monday.

The merchandise trade deficit was $93.6 billion in Q3 this fiscal year, which is higher than the $79.3 billion recorded in Q3FY25.

Though the CAD remained relatively benign in Q3FY26, weakness in the capital account persisted, causing foreign exchange reserves to deplete by $24.4 billion on a balance of payments basis. In Q3 last fiscal too, forex depletion was witnessed, and it was of even higher magnitide ($ 37.7 billion. In April-December 2025, the reserves depleted by $30.8 billion as compared with a depletion of US$ 13.8 billion a year ago.

Net inflows of $14.4 billion

Overall capital and financial account witnessed net inflows of $14.4 billion, a relatively low figure when compared with the regular pattern.

The current quarter may also witnes high trade deficit, causing CAD to widen. Merchandise trade deficit widened to a three-month high of $ 34.68 billion in January driven by a significant increase in imports of gold and silver, while exports stagnated due to high additional US tariffs.

Net services receipts increased to $57.5 billion in Q3FY26 from $51.2 billion a year ago. Services exports have risen on a y-o-y basis in major categories such as computer services and other business services.

Net outgo on the primary income account, mainly reflecting payments of investment income, decreased to $12.2 billion in Q3FY26 from $16.4 billion in the year ago quarter. Personal transfer receipts under secondary income account, mainly representing remittances by Indians employed overseas, rose to $36.9 billion in Q3 this fiscal year compared with $35.1 billion in Q32024-25.

Net FDI outflow of $3.7 billion in Q3

In the financial account, foreign direct investment (FDI) recorded a net outflow of $3.7 billion in Q3 this fiscal, higher than a net outflow of $ 2.8 billion in Q3FY25.

Foreign portfolio investment (FPI) also recorded a marginal net outflow of $0.2 billion in Q3FY26, lower than a net outflow of $11.4 billion in Q3FY25.

Non-resident deposits recorded a net inflow of $5.1 billion in Q3FY26, higher than $3.1 billion in Q3FY25. Net inflows under external commercial borrowings (ECBs) to India amounted to US$ 3.3 billion in Q3FY26, lower than a net inflow of $4.4 billion in Q3FY25.

The CAD moderated to $30.1 billion (1% of GDP) in April-December 2025 from $36.6 billion (1.3%) during April-December 2024.