India's current account deficit widens to $25.8 bn in H1FY27: RBI data

India’s current account deficit (CAD) widened to $25.8 billion in April-September 2026 from $18 billion a year ago, as the merchandise trade deficit expanded and net income outflows increased, according to preliminary balance of payments (BoP) data released by the Reserve Bank of India (RBI) on Friday.

However, the country’s overall balance of payments position improved significantly, swinging to a surplus of $66.8 billion in the first half of FY27 from a deficit of $6.4 billion in the corresponding period last year, supported by a sharp increase in capital inflows, particularly through banking capital.

The merchandise trade deficit widened to $176.1 billion in H1 FY27 from $158.1 billion a year ago. Merchandise exports increased to $265.3 billion from $221.5 billion, but imports rose at a faster pace to $441.4 billion from $379.6 billion.

The net income deficit also widened to $32.4 billion from $25.8 billion during the period. This was partly offset by an increase in net services exports to $105 billion from $98.8 billion and net transfers, which include remittances, to $77.7 billion from $67.2 billion.

Meanwhile, the capital account surplus surged to $92.6 billion in H1 FY27 from $11.6 billion in the corresponding period last year. Banking capital inflows stood at $125.2 billion, compared with just $0.3 billion a year ago. Within banking capital, net inflows through non-resident Indian (NRI) deposits stood at $125.6 billion, against $6.1 billion in the year-ago period.

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Net foreign portfolio investment (FPI) outflows increased to $10.4 billion in H1 FY27 from $4.1 billion a year ago, while external commercial borrowings (ECBs) recorded net outflows of $40.6 billion, compared with net inflows of $7.2 billion in the corresponding period last year.

Net foreign direct investment (FDI), on the other hand, recorded inflows of $8.8 billion during the first half, marginally higher than $7.4 billion a year ago.

In September 2026, the current account deficit stood at $7.4 billion, compared with $5.2 billion in the same month last year.

The merchandise trade deficit narrowed to $30 billion in September from $33.4 billion a year ago. Exports increased to $45.3 billion from $36.4 billion, while imports also rose to $75.3 billion from $69.8 billion.

Net services exports increased to $19.2 billion from $18.8 billion. Net transfers, supported by remittances, declined to $10.9 billion from $11.5 billion. Meanwhile, the net income deficit widened to $7.6 billion from $2.2 billion in September 2025.

On the capital account, India recorded net inflows of $16.2 billion in September, compared with net outflows of $0.4 billion a year ago. This was primarily supported by banking capital inflows of $22.2 billion and net ECB inflows of $4.5 billion, against $0.6 billion in the corresponding month last year.

Within banking capital, net NRI deposit inflows increased to $3.7 billion in September from $0.4 billion a year ago. Short-term credit to India recorded net inflows of $1.6 billion, lower than $2.5 billion in September 2025.

However, foreign portfolio investors recorded net outflows of $6.7 billion during the month, compared with $0.6 billion a year ago. Net FDI also recorded outflows of $4.9 billion, higher than the $2.3 billion outflows recorded in September 2025.

Overall, India’s BoP recorded a surplus of $8.8 billion in September, compared with a deficit of $5.6 billion in the same month last year. The surplus narrowed from $45.4 billion in August.

“India’s BoP outlook is showing signs of meaningful improvement, with the September surplus at $8.8 billion, supported by stronger-than-expected banking capital inflows of $22.2 billion. Remittances of around $12 billion and an improvement in the services surplus to $19 billion are also providing support to the external account. While the FCNR(B)-related inflow support has now ended, pressure on the capital account appears to be easing, largely due to lower importer hedging demand following RBI’s recent measures,” said Gaura Sen Gupta, Chief Economist, IDFC First Bank.

“Going forward, continued improvement in foreign inflows, resilient remittances and lower dollar hedging demand should help offset the absence of FCNR(B) support. Overall, India’s BoP position is likely to improve in H2 FY27, potentially moving from a mild deficit towards balance or a modest surplus, thereby reducing pressure on FX reserves and keeping the INR range bound,” she added.(End)