India’s Current Account Surplus Narrows To USD 7.1 Billion In Q4, Trade Deficit Widens
India’s current account surplus shrank to USD 7.1 billion (0.7% of GDP) in Q4 2025-26, down from USD 13.7 billion (1.4% of GDP) in Q4 2024-25, due to a widening merchandise trade deficit of USD 83.4 billion, despite growth in services exports and remittances. Foreign direct investment (FDI) surged to a net inflow of USD 4.2 billion, while foreign portfolio investment (FPI) saw a larger net outflow of USD 12.0 billion compared to the previous year.
India’s current account surplus narrowed to USD 7.1 billion (0.7% of GDP) in Q4 2025-26, down from USD 13.7 billion (1.4% of GDP) in the same period last year, according to data released by the Reserve Bank of India (RBI). The decline was driven by a widening merchandise trade deficit, which reached USD 83.4 billion in Q4 2025-26, up from USD 59.3 billion in Q4 2024-25. Meanwhile, net services receipts increased to USD 60.4 billion, up from USD 53.3 billion a year ago, reflecting stronger growth in sectors like computer services and business services. The primary income account saw a slight reduction in net outflows, decreasing to USD 11.1 billion from USD 11.9 billion in the previous quarter. Personal transfer receipts, primarily remittances from Indians working abroad, rose significantly to USD 43.5 billion, up from USD 33.9 billion in Q4 2024-25. Foreign direct investment (FDI) recorded a net inflow of USD 4.2 billion in Q4 2025-26, a substantial increase from USD 0.4 billion in the same period last year. However, foreign portfolio investment (FPI) experienced a net outflow of USD 12.0 billion, more than double the USD 5.9 billion outflow observed in Q4 2024-25. The RBI data highlights a mixed performance in capital flows, with strong FDI inflows offset by continued FPI outflows. The widening trade deficit suggests challenges in balancing imports and exports, despite robust growth in services and remittances. Analysts may attribute the FDI surge to increased investor confidence in India’s economic stability, while the larger FPI outflow could reflect shifting global market conditions or profit repatriation by foreign investors. Overall, the Q4 2025-26 data indicates a complex economic landscape for India, with trade deficits and capital flows shaping the current account balance. The RBI’s figures underscore the need for sustained efforts to boost exports and manage foreign investment dynamics to maintain economic stability.
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