India’s Balance of Payments (BoP) slipped into an $8.1 billion deficit in the April-June quarter, but large inflows under the Reserve Bank of India’s three swap facilities are likely to lead to a substantial BoP surplus in 2026-27, economists said. However, they differ on the size of the BoP surplus in the current fiscal year, with estimates ranging widely from $40 billion to $100 billion.
The BoP was in a deficit of $24 billion in FY26 and a $5 billion in FY25.
While India’s current account deficit (CAD) is expected to widen sharply in FY27 to around 1-2% of GDP (up from 0.6% of GDP in FY26), the capital account surplus is expected to rise steeply thanks to the RBI’s steps to attract foreign capital.
In June, the central bank announced a special facility to attract foreign currency through Foreign Currency Non-Resident (Bank) (FCNR(B) deposits, External Commercial Borrowings (ECBs), and Overseas Foreign Currency Borrowings (OFCBs), with the RBI offering banks a three-to-five-year swap facility that effectively covered hedging costs.
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The FCNR(B) window has seen strong flows so far, prompting the RBI to close the scheme on August 31, a month ahead of the original schedule. The OFCB and ECB schemes will continue to be open till December 31. According to RBI data, inflows under the three facilities totalled $56.85 billion between June 8 and August 13, of which FCNR(B) deposits accounted for $52.3 billion.
“Notwithstanding the early closure of the window, we believe banks could maximize the second half of August 2026 by putting their deposit mobilization exercise on a hyperdrive. As such, we now expect the special forex inflows to potentially touch $85 billion by December vs our earlier expectation of $75 billion,” economists at QuantEco Research said.
QuantEco projects the BoP to be in a $70 billion surplus in FY27, assuming an average crude oil price of $80-85 per barrel. According to latest data, the BoP was in a surplus of $2.9 billion in June, against a deficit of $0.4 billion a year ago.
Gaura Sen Gupta, chief economist, IDFC FIRST Bank projects the full-year BoP surplus at $40 billion with the September quarter surplus alone seen at $44 billion. “Some part of the dollar inflows will be countered by the RBI allowing existing dollar buy-sell swaps to mature, as these will be replaced by longer-tenor swaps undertaken under the FCNR(B), ECB, and OFCB windows,” Sen Gupta said. “Another factor that will counter some of the dollar inflows is spot dollar selling by the RBI to limit depreciation pressure on the INR,” she said.
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Widening Trade Deficit
Apart from the boost from RBI’s measures, India’s external position has also been supported by remittances, which rose 34% year-on-year to $41.4 billion in the first quarter of FY27. Notably, the pace of rise in net transfers, which include remittances, slowed down to 9% in June. The key risks to the BoP are a rising goods trade deficit and higher global energy prices.
The merchandise trade deficit rose 23% year-on-year to $119 billion in the first four months of FY27. “At the same time, services exports growth has seen a moderation compared with last year, amid ongoing AI-related disruption,” ICICI Bank said in a report. Given that oil prices remain elevated, the goods deficit is projected to widen to $379 billion, with the CAD at $54 billion (1.4% of GDP) assuming an oil price of $80/bbl, the report added.
Higher oil prices, which have swung between $70 per barrel to $100 per barrel since early July, and the uncertainties from the war in West Asia continue to cloud India’s external sector outlook, economists said.
TOPICSeconomic growthThis article was first uploaded on August sixteen, twenty twenty-six, at forty-two minutes past five in the evening. © The Indian Express (P) Ltd