India’s current account deficit narrows to US$2.4 billion in Q1 FY2025-26, RBI data shows

The RBI data highlights that India’s current account balance recorded a deficit of US$2.4 billion (0.2% of GDP) in Q1:2025-26, compared with a deficit of US$8.6 billion (0.9% of GDP) in Q1:2024-25, and against a surplus of US$13.5 billion (1.3% of GDP) in Q4:2024-25.

The merchandise trade deficit, however, widened to US$68.5 billion in Q1 2025-26 from US$63.8 billion in Q1 2024-25, reflecting higher import growth. “Merchandise trade deficit at US$68.5 billion in Q1:2025-26 was higher than US$63.8 billion in Q1:2024-25,” the RBI noted.

On the income side, the net outgo on the primary income account, which mainly comprises investment income payments, rose to US$12.8 billion from US$10.9 billion in the year-ago period. Meanwhile, remittances from overseas Indians continued to provide steady support, increasing to US$33.2 billion in Q1 2025-26, up from US$28.6 billion in Q1 2024-25.

According to the RBI data, capital flows into India remained broadly stable. Net foreign direct investment (FDI) stood at US$5.7 billion during Q1 2025-26, slightly lower than the US$6.2 billion seen in the corresponding period last year. Foreign portfolio investment (FPI) flows improved, posting a net inflow of US$1.6 billion, compared with US$0.9 billion a year ago.

External borrowings also contributed positively. External commercial borrowings (ECBs) recorded net inflows of US$3.7 billion in Q1 2025-26, higher than the US$1.6 billion recorded in Q1 2024-25. However, non-resident deposits (NRI deposits) saw a dip in inflows, amounting to US$ 3.6 billion, slightly lower than US$ 4 billion a year earlier.

“NRI deposits recorded a lower net inflow of US$ 3.6 billion in Q1:2025-26 than US$ 4.0 billion in Q1:2024-25,” per the RBI data.