Even as the country is said to witness a “balance of payments stress test” in the current fiscal year due to rising energy import bill, subdued exports and an unusually weak capital account, data revealed by the Reserve Bank of India (RBI) on Monday showed a surprise current account surplus in the fourth quarter of 2025-26.
This resulted in a benign current account deficit (CAD) of 0.6% of the gross domestic product (GDP) in FY26, the same level as the year before, as against around 1% expected by many analysts.
The Q4FY26 current account surplus reached $7.1 billion (0.7% of GDP) despite an $83.4 billion merchandise trade deficit. This surplus was supported by solid net services receipts of $60.4 billion and remittances of $43.5 billion.
Data also showed that the $20 billion in forex swaps undertaken by the RBI during the quarter helped the Balance of Payments (BoP). The quarter saw forex reserves increase by $7.2 billion, compared with the depletion of a sizeable $24.4 billion in Q3FY26 and $10.9 billion in Q2FY26.
India had previously reported a quarterly current account surplus in Q4FY25 ($13.7 billion or 1.4% of the GDP).
However, the current quarter (Q1FY27) appears to be relatively more stressful. Merchandise trade deficit expanded to $28.38 billion in April, as a surge in crude shipments pushed imports to a six-month high with the West Asia war disrupting supplies and inflating oil and LNG import bills.
During April-May this fiscal year, Foreign Portfolio Investors (FPIs) offloaded equities worth $10.1 billion while they were net purchasers of bonds worth just $131 million, according to NSDL data.
Last week, Chief Economic Advisor V. Anantha Nageswaran said that tax relief on government securities for the foreign investors would allow smooth funding of the Current Account Deficit (CAD) this financial year, which many analysts peg at around 2% of the GDP. “We have to wait and see. There are large unknown unknowns. “There is no point speculating where CAD will settle in FY27 at this point in time,” Nageswaran said, after the National Statistical Office released the GDP data on Friday.
In the financial account, foreign direct investment (FDI) recorded a net inflow of $4.2 billion in Q4FY26, higher than the $0.4 billion recorded in the year ago quarter. FPIs recorded a net outflow of $12 billion in Q4FY26, compared with an outflow of $5.9 billion in Q4FY25.
As for the whole of last fiscal year, net FDI inflows increased to $6.9 billion from $1 billion in 2024-25. FPIs recorded net outflows of $16.4 billion in 2025-26 as against net inflows of $ 3.6 billion a year ago. In 2025-26, foreign exchange reserves depleted by $23.6 billion on a BoP basis as compared with a depletion of $5 billion a year ago, according to the RBI’s statement.
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