Mumbai: India’s external sector showed a strong turnaround in the January–March quarter of FY 2025–26, with the country posting a current account surplus of USD 7.1 billion, equivalent to 0.7% of GDP, according to data released by the Reserve Bank of India. The improvement comes despite a widening merchandise trade deficit during the quarter.
Current Account Surplus Improves in Q4 FY26
India’s current account balance turned positive in Q4 FY26, recording a surplus of USD 7.1 billion compared to USD 13.7 billion in the same quarter of the previous fiscal year (Q4 FY25).
As a share of GDP, the surplus stood at 0.7%, reflecting steady inflows from services exports and remittances, even as trade pressures persisted.
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Full-Year Current Account Deficit Stays Moderate
For the entire fiscal year, India reported a current account deficit (CAD) of USD 25.2 billion, or 0.6% of GDP, slightly higher than the USD 22.9 billion (0.6% of GDP) recorded in FY25.
Despite quarterly improvements, the annual deficit reflects ongoing pressure from elevated imports and global commodity price movements.
Services Sector Drives External Balance Strength
A key support factor for the current account was the strong performance of the services sector.
Net services receipts increased to USD 60.4 billion in Q4 FY26, up from USD 53.3 billion in the same quarter last year. Growth was led by major export categories such as:
- Computer services
- Other business services
This sustained expansion highlights India’s continued strength in IT and knowledge-based exports.
Merchandise Trade Deficit Widens Sharply
In contrast, the merchandise trade deficit widened significantly during the quarter.
- Q4 FY26 trade deficit: USD 83.4 billion
- Q4 FY25 trade deficit: USD 59.3 billion
The sharp increase reflects higher import bills, which outweighed gains from export growth in goods, putting pressure on the overall current account balance.
Overall External Sector Snapshot
While services exports provided strong support, the widening goods trade gap limited the overall surplus position. The mixed performance underscores India’s dependence on services-led export growth to offset volatility in merchandise trade.
About the Reserve Bank of India
The Reserve Bank of India is India’s central banking institution responsible for managing monetary policy, regulating the financial system, and maintaining financial stability. It also publishes key macroeconomic data, including balance of payments and external sector statistics that track the country’s trade and financial flows.
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