India posts $7.1 billion current account surplus in Q4 FY26 as services exports, remittances offset wider trade gap

India recorded a current account surplus of $7.1 billion, or 0.7% of GDP, in the fourth quarter (January–March) of FY26, aided by robust services exports and strong remittance inflows that helped offset a widening merchandise trade deficit, according to data released by the Reserve Bank of India (RBI).

The surplus marks a sharp turnaround from the current account deficit of $13.2 billion (1.3% of GDP) reported in the preceding quarter. However, it was lower than the $13.7 billion surplus recorded in the corresponding quarter of FY25, reflecting pressure from a larger goods trade gap.

India’s merchandise trade deficit widened to $83.4 billion in Q4 FY26 from $59.3 billion a year earlier as imports outpaced exports. The impact of the higher trade deficit was cushioned by strong performance in the services sector. Net services receipts rose to $60.4 billion during the quarter, up from $53.3 billion in the year-ago period, driven largely by growth in computer services and other business services exports.

Services exports, remittances cushion wider trade deficit

Remittances also continued to provide significant support to the external account. Personal transfer receipts, primarily money sent home by Indians working overseas, increased to $43.5 billion during the quarter from $33.9 billion a year ago. Meanwhile, net outgo under the primary income account moderated to $11.1 billion from $11.9 billion.

On the capital account side, foreign direct investment (FDI) inflows improved, with net inflows rising to $4.2 billion in Q4 FY26 from $0.4 billion a year earlier. Foreign portfolio investors (FPIs), however, remained net sellers, pulling out $12 billion during the quarter compared with outflows of $5.9 billion in the corresponding period last year.

Despite the mixed capital flow picture, India’s foreign exchange reserves increased by $7.2 billion on a balance-of-payments basis during the March quarter.

FY26 deficit held steady despite reserve drawdown

For FY26 as a whole, India’s current account deficit widened marginally to $25.2 billion from $22.9 billion in FY25, although it remained unchanged at 0.6% of GDP. The annual deficit was driven by a wider merchandise trade gap of $337.3 billion, compared with $286.9 billion in the previous year.

The impact of the higher trade deficit was partly offset by a strong invisible surplus. Net services receipts rose to $216.6 billion in FY26 from $188.8 billion in the previous year, while secondary income receipts, including remittances, increased to $143.6 billion from $123.5 billion. As a result, net invisibles climbed to $312 billion during the year, compared with $264 billion in FY25.

Commenting on the numbers, Rahul Agrawal, Senior Economist at Icra, said the stronger-than-expected March quarter performance helped contain FY26’s current account deficit at 0.6% of GDP. He noted that financing even this modest deficit proved challenging amid weak net capital inflows, resulting in a $23.6 billion drawdown in India’s reserve assets during the financial year.