India's Current Account Deficit Reaches 1.3% of GDP in Q3 2025-26
Synopsis
India's current account deficit has hit $13.2 billion, representing 1.3% of GDP in the latest fiscal quarter. This shift highlights significant changes in trade and investment flows, alongside rising remittances from abroad. Discover the implications of these figures on the nation's economic landscape.
Key Takeaways
Current Account Deficit: $13.2 billion or 1.3% of GDP.
Trade Deficit: Increased to $93.6 billion.
Services Exports: Rose to $57.5 billion.
Remittances: Increased to $36.9 billion.
Net FDI: $3.0 billion in April-December 2025.
Mumbai, March 2 (NationPress) The current account deficit (CAD) for India reached $13.2 billion, accounting for 1.3 percent of the GDP during the third quarter (October–December) of the fiscal year 2025–26, as per the preliminary data on the balance of payments published by the RBI on Monday.
In the same quarter of the previous financial year, the deficit was $11.3 billion, or 1.1 percent of GDP.
The merchandise trade deficit surged to $93.6 billion in Q3FY26, up from $79.3 billion a year prior. Data indicated that goods exports were valued at $111.7 billion, while imports totaled $205.3 billion, leading to a net goods deficit of $93.6 billion.
Despite this, there was a significant rise in both services exports and remittances sent home by expatriate Indians during the quarter.
Net services receipts increased to $57.5 billion in Q3FY26, compared to $51.2 billion in Q3FY25. The RBI noted that services exports grew on a year-on-year basis across major categories, including computer services and other business services.
Personal transfers, reflecting remittances from Indians working abroad, rose to $36.9 billion, up from $35.1 billion the previous year.
Net outflows under the primary income account, primarily reflecting investment income payments, dropped to $12.2 billion in Q3FY26 from $16.4 billion in the same quarter the previous year.
Foreign direct investment (FDI) saw a net outflow of $3.7 billion in Q3FY26, compared to a net outflow of $2.8 billion in Q3FY25, according to the data.
The RBI reported that foreign portfolio investment (FPI) experienced a net outflow of $0.2 billion in the quarter, significantly less than the net outflow of $11.4 billion during the same period last year. Non-resident deposits showed a net inflow of $5.1 billion, an increase from $3.1 billion a year earlier.
Net inflows from external commercial borrowings (ECBs) totaled $3.3 billion, down from $4.4 billion in Q3FY25, the RBI noted.
Foreign exchange reserves decreased by $24.4 billion on a balance of payments basis in Q3FY26, compared to a reduction of $37.7 billion in the same quarter of the previous year.
For the nine-month period from April to December 2025, the current account deficit narrowed to $30.1 billion, or 1.0 percent of GDP, down from $36.6 billion, or 1.3 percent of GDP, in April–December 2024, according to the RBI data.
Net invisible receipts, which include services, primary income, and secondary income accounts, reached $221.5 billion during April–December 2025, an increase from $191.0 billion the previous year, as per the RBI.
Net FDI inflows rose to $3.0 billion in April–December 2025, significantly higher than $0.6 billion in the same period of 2024. Meanwhile, FPI recorded net outflows of $4.3 billion during April–December 2025, contrasting with net inflows of $9.4 billion a year earlier.
Point of View
It is crucial to present a balanced view on India's current account deficit, which has shown a concerning rise but also reflects positive growth in remittances and services exports. The data portrays a multifaceted economic scenario that requires careful consideration and response.
NationPress
20 Jun 2026
Frequently Asked Questions
What is India's current account deficit?
India's current account deficit (CAD) reflects the difference between the country's total exports and imports of goods, services, and transfers. It indicates how much more the country is spending than it is earning.
How does the CAD affect the Indian economy?
A high CAD can lead to depreciation of the national currency and affect foreign investment. It indicates a reliance on foreign capital to finance the deficit.
What factors contributed to the increase in CAD?
The increase in CAD was primarily driven by a rise in merchandise trade deficit, although there was growth in services exports and remittances.
What is the significance of remittances in the CAD?
Remittances play a vital role in offsetting the CAD, providing a source of foreign exchange and contributing positively to the current account.
How can India reduce its current account deficit?
India can reduce its CAD by boosting exports, reducing imports, and attracting more foreign investment.
