Despite lower capital inflows, India posted a $7.2 billion BoP surplus for the January-March period, supported by stronger remittances, robust services exports and reduced oil imports. According to Goldman Sachs, this reflected precautionary dollar demand amid heightened uncertainty in West Asia.
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“Going forward, higher oil prices will likely widen India’s current account deficit, but the deterioration is likely to be less severe than in past energy shock episodes,” it said in its latest report, ‘India: A More Favourable Balance of Payments Outlook’.
The US-based financial services company attributed the rupee’s depreciation largely to precautionary demand for dollars amid heightened geopolitical tensions in West rather than a deterioration in India’s external position.
It expects India to be less vulnerable to higher crude oil prices than in previous years, citing lower oil intensity, improved energy efficiency and greater responsiveness of oil demand to increasing prices.
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The report also factored in the RBI’s recent measures to encourage foreign currency inflows, including incentives for foreign currency non-resident (bank) account deposits, concessional swap facilities for external commercial borrowings and tax benefits for foreign investors in government securities. These measures could bring in about $60 billion of additional capital inflows during 2026, as per Goldman Sachs estimates.