India’s current account deficit narrows to US$2.4 billion in Q1 FY2025-26, RBI data shows
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In the first quarter of the financial year (April–June) of 2025-26, India’s balance of payments (BoP) position showed resilience. The current account deficit (CAD) is narrowing sharply, driven by strong services exports and robust remittance inflows, according to preliminary data released by the Reserve Bank of India (RBI) on September 1, 2025.
The RBI data highlights that India’s current account balance recorded a deficit of US$2.4 billion (0.2% of GDP) in Q1:2025-26, compared with a deficit of US$8.6 billion (0.9% of GDP) in Q1:2024-25, and against a surplus of US$13.5 billion (1.3% of GDP) in Q4:2024-25.
The merchandise trade deficit, however, widened to US$68.5 billion in Q1 2025-26 from US$63.8 billion in Q1 2024-25, reflecting higher import growth. "Merchandise trade deficit at US$68.5 billion in Q1:2025-26 was higher than US$63.8 billion in Q1:2024-25," the RBI noted.
On the income side, the net outgo on the primary income account, which mainly comprises investment income payments, rose to US$12.8 billion from US$10.9 billion in the year-ago period. Meanwhile, remittances from overseas Indians continued to provide steady support, increasing to US$33.2 billion in Q1 2025-26, up from US$28.6 billion in Q1 2024-25.
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According to the RBI data, capital flows into India remained broadly stable. Net foreign direct investment (FDI) stood at US$5.7 billion during Q1 2025-26, slightly lower than the US$6.2 billion seen in the corresponding period last year. Foreign portfolio investment (FPI) flows improved, posting a net inflow of US$1.6 billion, compared with US$0.9 billion a year ago.
External borrowings also contributed positively. External commercial borrowings (ECBs) recorded net inflows of US$3.7 billion in Q1 2025-26, higher than the US$1.6 billion recorded in Q1 2024-25. However, non-resident deposits (NRI deposits) saw a dip in inflows, amounting to US$ 3.6 billion, slightly lower than US$ 4 billion a year earlier.
"NRI deposits recorded a lower net inflow of US$ 3.6 billion in Q1:2025-26 than US$ 4.0 billion in Q1:2024-25," per the RBI data.
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