India's current account surplus halves in Q4FY26 as import bill surges: Crisil

India's current account surplus narrowed sharply in the January-March quarter of FY26 as a widening merchandise trade deficit offset gains from services exports, according to a report by Crisil.

The report released on Tuesday says the country's current account posted a surplus of $7.1 billion, or 0.7% of GDP, in the fourth quarter of FY26, compared with a surplus of $13.7 billion, or 1.4% of GDP, in the corresponding quarter a year earlier.

"Typically, fourth quarters tend to throw up a surplus. However, the surplus this time was around half the $13.7 billion recorded in the same period last fiscal because the goods trade deficit surged," Crisil said in its report released on Tuesday.

The merchandise trade deficit widened to $83.4 billion during the quarter from $59.3 billion a year earlier as imports jumped to $196.6 billion from $175.8 billion, while exports slipped to $113.1 billion from $116.5 billion. Crisil said exports were also affected by the conflict in West Asia.

The report noted that a stronger services trade surplus helped cushion the impact. India's services surplus rose to $60.4 billion in the March quarter from $53.3 billion in the same period of the previous fiscal.

For the full fiscal year, the current account deficit stood at $25.2 billion compared with $22.9 billion in FY25. However, as a share of GDP, the deficit remained unchanged at 0.6%.

"The widening goods trade deficit was offset by a rise in the services trade surplus," the report said.

West Asia risks under watch

Crisil flagged risks emerging from the ongoing tensions in West Asia, particularly for remittance inflows. Secondary income, which largely comprises remittances, increased to 3.4% of GDP in FY26 from 3.2% in FY25.

"Secondary income, largely comprising remittances, increased to 3.4% of GDP last fiscal from 3.2% in fiscal 2025 and will need monitoring given 38% of it emanates in West Asia," the report said.

The report also noted that foreign exchange reserves benefited from valuation gains of $46.4 billion during FY26, helping offset a $23.6 billion decline on a balance of payments basis.

Crisil expects external sector pressures to intensify in the current fiscal. “We expect the CAD to widen to 2.2% of GDP this fiscal, up from 0.6% last fiscal,” the report said.

“Costlier crude oil, natural gas and fertilisers will crank up India's import bill significantly this fiscal, while exports are heading for a decline due to global trade disruptions and weakening demand. Remittances from the Gulf (38% of total) are also at risk because of the West Asia conflict,” it added.