India's current account surplus narrowed sharply in the fourth quarter of fiscal year 2026 as a widening merchandise trade deficit offset strong growth in services exports and remittance inflows, according to data released by the Reserve Bank of India (RBI).
The country's current account surplus stood at $7.1 billion, or 0.7% of GDP, in the January-March quarter of fiscal 2026, down from $13.7 billion, or 1.4% of GDP, recorded in the corresponding quarter of the previous year.
The decline was primarily driven by a significantly wider merchandise trade deficit, which expanded to $83.4 billion in quarter ended March from $59.3 billion a year earlier. The higher import bill outweighed gains from India's services sector and overseas remittances.
Providing support to the external account, net services receipts rose to $60.4 billion during the quarter compared with $53.3 billion in ther fourth quarter. The increase was led by robust growth in exports of computer services and other business services, underscoring the resilience of India's technology and outsourcing sectors amid a challenging global environment.
India also benefited from stronger remittance inflows. Personal transfer receipts, which largely comprise money sent home by Indians working overseas, increased to $43.5 billion in the fourth quarter from $33.9 billion in the year-ago period.
Meanwhile, the net outgo under the primary income account, which mainly reflects investment income payments, eased to $11.1 billion from $11.9 billion a year earlier, providing some relief to the current account balance.
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On the capital flows front, foreign direct investment (FDI) showed signs of improvement. Net FDI inflows rose sharply to $4.2 billion in quarter ended March compared with just $0.4 billion in the corresponding period last year, indicating continued long-term investor confidence in the Indian economy.
However, foreign portfolio investment (FPI) flows remained under pressure. FPIs recorded a net outflow of $12 billion during the quarter, significantly higher than the outflow of $5.9 billion seen a year ago, reflecting volatile global capital flows and investor caution.
Other components of the financial account presented a mixed picture. Net inflows through non-resident Indian (NRI) deposits increased to $3.3 billion from $2.8 billion, while net inflows under external commercial borrowings (ECBs) moderated to $3.6 billion from $7.5 billion in the previous year.
India's foreign exchange reserves increased by $7.2 billion on a balance of payments basis during the quarter, lower than the accretion of $8.8 billion recorded in quarter ended March.
For the full financial year, India's current account deficit stood at 0.6% of GDP, unchanged from fiscal 2025. However, foreign exchange reserves declined by $23.6 billion during fiscal 2026, compared with a rise of $5 billion in the previous year, highlighting the impact of capital flow volatility on the country's external sector position.
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