- India's current account deficit widened to $4.2 billion or 0.5% of GDP in Q1FY27
- Merchandise trade deficit rose sharply to $86.1 billion from $68.9 billion year ago
- Net services receipts increased to $51.6 billion, aiding the current account balance
India's current account deficit (CAD) widened to $4.2 billion, or 0.5% of GDP, in the April-June quarter of 2026-27, compared with $3.4 billion, or 0.4% of GDP, in the year-ago period, according to preliminary balance of payments data released by the Reserve Bank of India (RBI) on Tuesday.
The increase in the CAD was primarily driven by a widening merchandise trade deficit, which more than offset stronger net services receipts and higher personal transfers.
India's merchandise trade deficit rose sharply to $86.1 billion in Q1FY27 from $68.9 billion in the corresponding quarter last year. Merchandise exports increased to $132 billion from $112.7 billion, while merchandise imports climbed to $218 billion from $181.6 billion during the quarter.
Within the merchandise trade deficit, the petroleum, oil and lubricants (POL) deficit widened to $37.6 billion from $32.2 billion a year earlier.
The widening trade deficit was partly cushioned by a rise in net services receipts. Net services receipts increased to $51.6 billion in Q1FY27 from $47.9 billion a year earlier. Services exports rose to $106.2 billion from $97.4 billion, while services imports increased to $54.6 billion from $49.5 billion.
Net secondary income, which largely reflects personal transfers and remittances, also strengthened significantly to $40.8 billion from $30.9 billion in the year-ago quarter. Meanwhile, net outgo under the primary income account declined to $10.5 billion from $13.3 billion, mainly reflecting lower investment income payments.
On the financial account, foreign direct investment (FDI) recorded a net inflow of $6.1 billion in Q1FY27, compared with $5.2 billion a year earlier. However, foreign portfolio investment (FPI) recorded a net outflow of $9.6 billion, reversing from a net inflow of $1.6 billion in the corresponding period last year.
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Non-resident deposits registered a net inflow of $2.8 billion, lower than the $3.6 billion recorded a year earlier. Net external commercial borrowings stood at $3.3 billion, compared with $4.4 billion in Q1FY26.
India's foreign exchange reserves declined by $8.1 billion on a balance-of-payments basis, excluding valuation effects, during Q1FY27. This compares with an accretion of $4.5 billion in the year-ago period. Including valuation effects, reserves declined by $22.5 billion during April-June 2026, compared with an accretion of $29.8 billion in the corresponding period last year.
The RBI said the quarter saw a valuation loss of $14.4 billion, primarily due to lower gold prices and appreciation of the US dollar against major currencies.
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