India’s current account deficit (CAD) narrowed to $5.2 billion in August from $6.1 billion a year ago, as a lower merchandise trade deficit and higher net services receipts offset a widening deficit in the income account, according to data released by the Reserve Bank of India (RBI) on Thursday. The current account deficit widened, though, in the April-August period.
Moreover, the balance of payments recorded a surplus of $45.4 billion in August, compared with a deficit of $5.6 billion a year ago, after steps were announced to attract foreign capital.
However, external commercial borrowings (ECBs) recorded a sharp net outflow of $22.4 billion in August, against a net outflow of $0.1 billion a year ago. Net ECBs to India recorded an inflow of $1.6 billion, compared with an outflow of $0.6 billion a year ago, while ECBs by India recorded a net outflow of $23.9 billion, against a net inflow of $0.4 billion in August 2025.
For April-August, net ECBs recorded an outflow of $28.3 billion, compared with an inflow of $6.7 billion in the year-ago period.
The merchandise trade deficit narrowed to $26.6 billion in August from $27.6 billion a year ago, as exports rose faster than imports. Merchandise exports increased to $44.7 billion from $35.1 billion, while imports rose to $71.3 billion from $62.7 billion.
Net services receipts rose to $16.5 billion from $15.6 billion in August 2025. Services exports increased to $35.5 billion from $31.2 billion, while imports rose to $18.9 billion from $15.6 billion.
Net transfers, which include remittances from Indians working abroad, rose to $12.8 billion from $12.2 billion a year ago. However, the net deficit in the income account widened to $8 billion from $6.3 billion.
For April-August of 2026-27, the CAD widened to $18.3 billion from $12.8 billion in the corresponding period of the previous financial year, as the merchandise trade deficit expanded to $146 billion from $124.7 billion. Net services receipts rose to $85.8 billion from $79.9 billion, while net transfers increased to $66.8 billion from $55.6 billion.
The capital account recorded a net inflow of $50.6 billion in August, against an inflow of $0.5 billion a year ago, led by banking capital. Net banking capital recorded inflows of $64.7 billion, compared with outflows of $4.7 billion in August 2025, with net non-resident Indian (NRI) deposits at $83 billion against $1 billion a year ago.
Net foreign direct investment (FDI) recorded an inflow of $3.3 billion, compared with an outflow of $0.1 billion a year ago. Portfolio investment recorded an inflow of $1.7 billion, against an outflow of $2.6 billion in August 2025.
With the capital account inflow far exceeding the current account deficit, the overall balance of payments recorded a surplus of $45.4 billion in August, compared with a deficit of $5.6 billion in the year-ago period. For April-August, the overall balance stood at a surplus of $58 billion, against a deficit of $0.8 billion a year ago.
“India’s merchandise exports expanded by over 20% for the second consecutive month in September 2026, even as growth in such imports cooled to 6-month low of 8.0%, amid a sharp contraction in gold imports. This contained the merchandise trade deficit at $30.2 billion in the month, lower than the $33 billion seen in September 2025, albeit largely in line with the levels seen during 5M FY2027,” said Aditi Nayar, chief economist at Icra.
Icra expects the current account deficit to widen to $13-15 billion in Q2FY27 from $4.2 billion in Q1FY27.
