India's Current Account Surplus Declines Amid Trade Deficit in Q4 2025-26

In the fourth quarter of 2025-26, India's current account surplus decreased to US$ 7.1 billion, influenced by a widening trade deficit. Despite this, foreign direct investment saw a significant rise, reaching US$ 4.2 billion. The report from the Reserve Bank of India highlights the contrasting trends in service exports and remittances, alongside shifts in foreign portfolio investments. This article delves into the key economic indicators shaping India's financial landscape, providing insights into the country's economic health and investment climate.

By Narendra Chaudhary Jun 8, 2026, 19:12 IST

Overview of India's Current Account

In the fourth quarter of the fiscal year 2025-26, India's current account surplus was recorded at US$ 7.1 billion, which is equivalent to 0.7% of the GDP. This marks a decrease from the US$ 13.7 billion surplus, or 1.4% of GDP, noted in the same quarter of the previous fiscal year. The widening merchandise trade deficit has overshadowed the robust growth in service exports and remittance inflows, as reported by the Reserve Bank of India (RBI). The merchandise trade deficit reached US$ 83.4 billion in Q4 2026, up from US$ 59.3 billion in Q4 2025. Meanwhile, net services receipts increased to US$ 60.4 billion in Q4 2026, compared to US$ 53.3 billion a year earlier. Major categories such as computer services and other business services contributed to the year-on-year rise in service exports. Additionally, the net outflow on the primary income account, primarily due to investment income payments, fell to US$ 11.1 billion in Q4 from US$ 11.9 billion in the same quarter last year. The data also indicated that personal transfer receipts, which largely consist of remittances from Indians working abroad, surged to US$ 43.5 billion in Q4 2026, up from US$ 33.9 billion in Q4 2025.

Surge in Foreign Direct Investment

FDI Net Inflow Increases

During the same quarter, foreign direct investment (FDI) saw a significant net inflow of US$ 4.2 billion, a notable rise from just US$ 0.4 billion recorded the previous year. Conversely, foreign portfolio investment (FPI) experienced a net outflow of US$ 12.0 billion in Q4 2026, compared to an outflow of US$ 5.9 billion in Q4 2025. Additionally, non-resident Indian (NRI) deposits reported a net inflow of US$ 3.3 billion in Q4 2026, up from US$ 2.8 billion in the same quarter of the previous year. Furthermore, net inflows from external commercial borrowings (ECBs) to India totaled US$ 3.6 billion in Q4 2026, a decrease from US$ 7.5 billion in Q4 2025.