India's balance of payments set for FY27 surplus after two deficit years
Synopsis
India's balance of payments is poised for a dramatic turnaround in FY27 — from deficit to surplus — as the capital account swells to an estimated $73 billion, net FDI nearly doubles, and the current account deficit narrows sharply to below 1.2 per cent of GDP. The shift, flagged by Care Edge Ratings, hinges on crude prices and whether US tariff risks materialise.
Key Takeaways
Care Edge Ratings projects India's balance of payments to swing to a surplus in FY27 after two consecutive deficit years.
Net FDI is forecast to rise to $15 billion in FY27, up from $6.9 billion in FY26.
The capital account surplus is expected to expand from $2 billion in FY26 to approximately $73 billion in FY27.
The current account deficit projection has been revised down to 0.8–1.2 per cent of GDP from an earlier estimate of 2.1 per cent .
Merchandise exports rose 15.9 per cent in Q1 FY27 , with petroleum exports up 35.1 per cent .
A potential 12.5 per cent US tariff on Indian exports remains a key risk to the outlook.
India's balance of payments (BoP) is projected to swing to a surplus in FY27 after two consecutive years of deficits, driven by strengthening net foreign direct investment and a surge in capital inflows, according to a report by Care Edge Ratings released on 17 July.
FDI and Capital Account Outlook
Net FDI is expected to nearly double, rising to $15 billion in FY27 from $6.9 billion in FY26, supported by stronger gross inflows and a tapering of repatriation. Concessional swap windows for FCNR(B) deposits, External Commercial Borrowings, and Overseas Foreign Currency Borrowings could collectively generate $45–60 billion in additional inflows during the year.
The capital account surplus is projected to expand sharply — from a modest $2 billion in FY26 to approximately $73 billion in FY27 — a turnaround that would underpin the overall BoP improvement.
Revised Current Account Deficit Projection
Care Edge Ratings has lowered its current account deficit (CAD) projection for FY27 to 0.8–1.2 per cent of GDP, down from an earlier estimate of 2.1 per cent. The revision reflects moderation in crude oil prices, resilience in services exports and remittances, and an uptick in merchandise exports.
'Our revised CAD projection is based on the assumption that crude oil price will average around USD 80–85 per barrel in FY27. If global crude oil prices remain lower, the CAD could slip below 1 per cent of GDP,' the report stated.
Merchandise Exports Momentum
Merchandise exports began FY27 on a strong footing, rising 15.9 per cent in Q1 FY27. Petroleum exports surged 35.1 per cent while non-petroleum exports climbed 12.5 per cent. The agency expects this momentum to continue, though it flagged the possibility of a 12.5 per cent tariff by the US on Indian exports as a key risk to monitor.
Policy Measures Attracting Foreign Capital
The government has introduced several measures to draw foreign capital, including expansion of the foreign currency bond universe, tax exemptions for FIIs and FPIs investing in government securities, and higher investment limits for NRIs and OCIs. Notably, some debt-market measures also address hurdles to India's inclusion in the Bloomberg Global Aggregate Index, which could unlock significant foreign portfolio inflows if achieved.
What to Watch
The BoP surplus hinges on crude oil prices holding near current levels and export momentum sustaining through potential US tariff headwinds. Any sharp reversal in global oil prices or a deterioration in the US trade stance could alter the trajectory, making these two variables the most critical monitorables for the rest of FY27.
Point of View
But it rests on a narrow set of assumptions — crude at $80–85 per barrel and US tariffs not biting hard. The capital account surge to $73 billion is partly policy-engineered through swap windows and FPI incentives, which means it is one-time in character rather than a structural improvement. The more durable signal is the CAD compression: if services exports and remittances hold, India's external account becomes genuinely more resilient. But the Bloomberg Global Aggregate Index inclusion remains incomplete, and until that materialises, the foreign portfolio inflow story is aspirational, not locked in.
NationPress
17 Jul 2026
Frequently Asked Questions
What is India's balance of payments outlook for FY27?
India's balance of payments is projected to move to a surplus in FY27, reversing two consecutive years of deficits. The turnaround is driven by a sharply higher capital account surplus of approximately $73 billion and a narrower current account deficit of 0.8–1.2 per cent of GDP, according to Care Edge Ratings.
Why is India's current account deficit projected to fall in FY27?
Care Edge Ratings revised the CAD projection down to 0.8–1.2 per cent of GDP from 2.1 per cent, citing moderation in crude oil prices, resilience in services exports and remittances, and stronger merchandise export growth. If crude prices remain below $80 per barrel, the CAD could fall below 1 per cent of GDP.
How much is India's net FDI expected to rise in FY27?
Net FDI is forecast to reach $15 billion in FY27, nearly double the $6.9 billion recorded in FY26. The improvement is attributed to stronger gross inflows and a tapering of repatriation by foreign investors.
What is the risk to India's BoP surplus in FY27?
The primary risks are a sharp rise in global crude oil prices above the assumed $80–85 per barrel range and the imposition of a 12.5 per cent US tariff on Indian exports, both of which could widen the current account deficit and erode the projected surplus.
What policy steps has the government taken to attract foreign capital?
The government has expanded the foreign currency bond universe, offered tax exemptions for FIIs and FPIs investing in government securities, and raised investment limits for NRIs and OCIs. Some debt-market measures also target India's inclusion in the Bloomberg Global Aggregate Index, which could unlock additional foreign portfolio inflows.
