The fourth quarter surplus had however narrowed as compared with the $13.7 billion surplus seen in the year-ago period, due to widened merchandise trade deficit amid the West Asia conflict, Reserve Bank of India (RBI) data showed.
Also read: India banks could raise $35-$40 billion via RBI’s foreign currency deposit scheme, PNB CEO Ashok Chandra says
“The positive surprise on the current account was due to remittances. The West Asia crisis may have resulted in precautionary transfer of funds. Moreover, the trade deficit was rangedbound as crude oil import volume declined in March,” said Gaura Sengupta, chief economist at IDFC First Bank.
Personal transfer receipts under secondary income accounts, mainly representing remittances by Indians employed overseas, rose to $43.5 billion in the quarter under review from $33.9 billion in the year-ago period. Merchandise trade deficit was at $83.4 billion against $59.3 billion over the same period.
For the full year, the current account deficit widened in absolute terms to $25.2 billion in FY26 from $22.9 billion in the preceding fiscal even as the deficit for both the years stood at 0.6% of the GDP. Capital account was at surplus at $25.4 billion for the fiscal, against $21.5 billion a year prior.
India typically records annual current account deficits because of its high crude oil and gold imports, which outpace its export revenues. The country has booked annual surplus in FY21 in recent times due to pandemic-induced contraction in trade deficits.Also read: India’s current account surplus at $7.1 bn in Q4 FY26, aided by robust services exports and remittances
“We maintain an expectation of a current account deficit of 2.4% of GDP, assuming the Indian crude basket of $90 per barrel. The measures taken by RBI and the government will support the capital account. Overall Bop is expected to be balanced in FY27,” Sengupta said.
Kotak Mahindra Bank chief economist Upasna Bhardwaj too upgraded the FY27 outlook from BOP being heavily into deficit zone ($50-75 billion deficit) to near neutral to marginally positive given the recent measures announced by the RBI.
In FY26, the country’s net invisible receipts were at $312 billion, higher than the preceding fiscal’s $264 billion, primarily on account of net services receipts and net personal transfers. Net foreign direct investment inflows rose to $6.9 billion from $1 billion for the same period.
The foreign portfolio investors however took out a net $16.4 billion in FY26 as they follow a risk-off sentiment against net inflows of $3.6 billion a year ago. The year also saw foreign exchange reserves depleted by $23.6 billion on a balance of payment basis as compared with a depletion of $5 billion a year ago. The balance of payment basis calculations exclude the valuation gains on the reserves.
If valuation gains are included, forex reserves grew by $22.8 billion in FY26 as compared with $21.9 billion rise in the year earlier.