India’s Balance of Payments (BoP) slipped into an $8.1 billion deficit in the April-June quarter, with both current and capital account positions worsening, data released by the Reserve Bank of India (RBI) on Friday showed. In contrast, the corresponding quarter in the previous year saw accretion of $4.5 billion to the foreign exchange reserves on a BoP basis.
The BoP was in a surplus of $2.9 billion in June, against a deficit of $0.4 billion a year ago.
However, concerns aren’t high, as capital accounts have lately shown much strength, partly aided by the special FCNR window for non-resident Indians. Forex reserves rose to a four-month high of $707 billion as of August 7.
The current account deficit (CAD) widened slightly to $3.1 billion in the April-June quarter, as the war-driven spike in global energy prices led to a sharp rise in the merchandise trade deficit. The CAD was $2.9 billion in the year-ago quarter, while it was in a surplus of $7 billion in January-March.
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The current account could remain under some stress in the current quarter as well, given the possibility of a high merchandise trade deficit. In July, the goods trade deficit stood at $31.98 billion, the highest since January ($34.8 billion).
The goods trade deficit increased to $85.7 billion in the first quarter of 2026-27, sharply up from $68.9 billion a year ago. Services trade surplus and remittances, on the other hand, rose in April-June, which limited the increase in CAD. Services trade surplus rose to $52.2 billion in April-June from $47.9 billion a year ago. Net transfers, which include remittances, rose 34% year-on-year to $41.4 billion in the first quarter.
The rise in remittances was “contrary to expectations,” said Madan Sabnavis, chief economist at Bank of Baroda. “Clearly the expat population were remitting more money to their relatives in India.”
In June, the current account was in a deficit of $6.2 billion, against a surplus of $1.2 billion a year ago. In the March quarter, India’s current account surplus was 0.7% of the Gross Domestic Product (GDP). The RBI did not express CAD as a share of GDP for the June quarter, as the GDP data for that quarter is yet to be released. Over the last three months, the central bank has been giving BoP data on a monthly basis, increasing the periodicity of data release from the quarterly pattern followed for years.
The capital account slipped into a deficit of $5 billion in April-June, from a surplus of $7.4 billion a year ago. The capital account position worsened primarily because of a jump in Foreign Portfolio Investment (FPI) outflows. Net foreign portfolio investment (FPI) outflows rose to $9.6 billion in April-June, against net inflows of $1.6 billion a year ago. In June, net FPI inflows rose to $2.5 billion from $2.4 billion a year ago.
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Net foreign direct investment (FDI) inflows turned negative again in May, after being in the positive territory for four straight months. Net FDI outflows in May were $0.1 billion, against net inflows of $0.9 billion a year ago, data released by the Reserve Bank of India (RBI) said on Wednesday.
While FPI flows turned negative in April-June, net foreign direct investment (FDI) inflows jumped to $7.8 billion from $4.8 billion a year ago, which kept the capital account deficit in check. In June, net FDI inflows slowed to $1.3 billion from $2.3 billion a year ago.
External Commercial Borrowings (ECB) remained marginal in April-June, while banking capital was just $3.5 billion. “While the current account may remain pressurized in the coming quarters, the capital account will be largely positive due to the RBI measures on FCNR and ECBs that will bring about an increment in forex surplus in BOP of $30-50 bn by the end of the year,” Sabnavis said.
TOPICSCurrent Account DeficitThis article was first uploaded on August fourteen, twenty twenty-six, at fifty-one minutes past eleven in the night. © The Indian Express (P) Ltd