Has India's Current Account Deficit Decreased to 1.3% of GDP in the July-September Quarter?
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Synopsis
Discover how India's current account deficit has decreased significantly, with critical insights on trade deficits and financial flows. This shift not only reflects economic resilience but also highlights the changing landscape of foreign investments and remittances.
Key Takeaways
- India's current account deficit fell to $12.3 billion in Q2 2025-26.
- The merchandise trade deficit was $87.4 billion, lower than last year's.
- Net services receipts increased significantly.
- FDI showed positive growth with a net inflow of $2.9 billion.
- Foreign exchange reserves saw a depletion of $10.9 billion.
Mumbai, Dec 1 (NationPress) India's current account deficit has decreased to $12.3 billion, representing 1.3% of GDP, for the second quarter (July-September) of the fiscal year 2025-26. This marks a reduction from $20.8 billion or 2.2% of GDP in the same quarter of the previous financial year, as per data released by the RBI on Monday.
During this quarter, the merchandise trade deficit stood at $87.4 billion, which is lower than the $88.5 billion reported for the corresponding period in 2024-25.
Net services receipts for Q2 of the current fiscal year rose to $50.9 billion from $44.5 billion in the previous year.
Exports in services have shown growth year-on-year in key sectors such as computer services and other business services, according to the RBI.
The net outflow on the primary income account, primarily reflecting investment income payments, increased to $2.2 billion in Q2:2025-26 from $9.2 billion in Q2:2024-25.
Personal remittances, recorded under the secondary income account, surged to $38.2 billion during this quarter, up from $34.4 billion last year.
In terms of Foreign Direct Investment (FDI), there was a net inflow of $2.9 billion in the July-Sept quarter, contrasting with a net outflow of $2.8 billion in the same quarter of 2024-25, as noted in the RBI statement.
For Foreign Portfolio Investment (FPI), a net outflow of $5.7 billion was recorded in Q2 of 2025-26, in contrast to a net inflow of $9.9 billion during the prior year’s quarter.
Furthermore, the net inflows from external commercial borrowings (ECBs) to India reached $1.6 billion in Q2:2025-26, compared to net inflows of $5 billion in the same period a year ago.
The non-resident deposits (NRI deposits) saw a net inflow of $2.5 billion in the second quarter, down from $6.2 billion last year.
There was a reduction of $10.9 billion in foreign exchange reserves (on a BoP basis) during Q2 of 2025-26, compared to an increase of $18.6 billion in the same quarter of the previous financial year, the statement further elaborated.
Point of View
The decline in India's current account deficit is a promising sign of economic stability and resilience. It reflects improvements in trade balances and increased remittances, which are vital for sustainable growth. The government's policies and the RBI's interventions seem to be steering the economy towards a healthier trajectory.
NationPress
01/12/2025
Frequently Asked Questions
What does a decrease in current account deficit signify?
A decrease in the current account deficit indicates an improvement in a country's balance of payments, suggesting stronger economic health and increased foreign investment.
How does the current account deficit affect the economy?
The current account deficit affects currency value, inflation, and overall economic stability. A lower deficit typically strengthens the currency and bolsters investor confidence.
