India’s current account moved into a surplus of $7.1 billion in the March quarter of FY26, supported by stronger services exports and higher remittance inflows, according to Reserve Bank of India data released on Monday (June 8). The surplus was equal to 0.7% of GDP but it was narrower than the $13.7 billion surplus posted in the same quarter last year.
The improvement on the services side and from remittances helped offset a larger goods trade gap. India’s merchandise trade deficit widened to $83.4 billion in Q4 FY26 from $59.3 billion a year earlier, reflecting higher import outgo.
Even so, this pressure was partly offset by gains on the services side. Net services receipts rose to $60.4 billion from $53.3 billion, with the RBI noting gains in computer services and other business services exports.
Remittances provide support, capital flows mixed
Remittances once again provided a crucial cushion. Personal transfer receipts — mainly money sent home by Indians working abroad — jumped to $43.5 billion during the quarter, compared with $33.9 billion a year earlier. At the same time, net outgo under the primary income account eased to $11.1 billion from $11.9 billion.
On the capital flows front, the picture remained mixed. Net foreign direct investment (FDI) inflows improved to $4.2 billion in the March quarter, up from a subdued $0.4 billion a year earlier. However, foreign portfolio investors (FPIs) continued to pull out funds, with net outflows widening to $12 billion from $5.9 billion in the corresponding period last year.
Other capital components showed modest traction. NRI deposits saw net inflows of $3.3 billion, compared with $2.8 billion a year ago. Meanwhile, net inflows through external commercial borrowings (ECBs) declined to $3.6 billion from $7.5 billion in the same quarter last year.
Despite the mixed capital flows, India’s foreign exchange reserves rose by $7.2 billion on a balance of payments basis during the quarter, although this was lower than the $8.8 billion increase recorded a year earlier, the RBI data showed.
BoP during FY2025-26
For the full financial year 2025-26, India posted a current account deficit of $25.2 billion (0.6% of GDP), slightly higher than $22.9 billion in FY25, with the deficit ratio remaining unchanged.
The widening goods trade deficit remained a key drag, expanding to $337.3 billion in FY26 from $286.9 billion in the previous year. However, this was offset to a large extent by robust invisibles. Net services receipts increased to $216.6 billion from $188.8 billion, while secondary income receipts, including remittances, rose to $143.6 billion from $123.5 billion.
As a result, net invisibles climbed to $312 billion during the year, up from $264 billion in FY25.
On the capital account, net FDI inflows rose to $6.9 billion in FY26 from $1 billion in the previous year. In contrast, FPIs turned net sellers, recording outflows of $16.4 billion compared with net inflows of $3.6 billion in FY25.
Reflecting these trends, India’s foreign exchange reserves declined by $23.6 billion on a balance of payments basis in FY26, a sharper drawdown than the $5 billion depletion seen in the previous year, the data showed.