India’s Current Account surplus narrows to $7.1 billion in Q4FY26; FPI outflows hit $16.4 billion

India’s current account surplus moderated to $7.1 billion, or 0.7 per cent of GDP, in the fourth quarter (January-March) of financial year 2025-26, compared with $13.7 billion in the same period a year ago, according to the Reserve Bank of India’s latest Balance of Payments data.

The decline in surplus was mainly due to a sharp rise in the merchandise trade deficit, which widened to $83.4 billion in Q4 FY26 from $59.3 billion in Q4 FY25. However, higher services exports and remittance inflows provided support to the external sector.

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Net services receipts increased to $60.4 billion during the quarter, compared with $53.3 billion a year earlier, driven by growth in computer services and other business services exports. Personal transfer receipts, largely reflecting remittances from Indians working overseas, rose to $43.5 billion from $33.9 billion during the same period.

For the full financial year 2025-26, India’s current account deficit stood at $25.2 billion, or 0.6 per cent of GDP, marginally higher than $22.9 billion recorded in FY25.

The data showed a mixed trend in foreign investment flows. Net foreign direct investment (FDI) inflows improved to $6.9 billion in FY26 from $1 billion in FY25. However, foreign portfolio investors (FPIs) pulled out $16.4 billion during the year, reversing the $3.6 billion inflow seen in the previous financial year.

Foreign exchange reserves declined by $23.6 billion on a balance of payments basis in FY26, compared with a depletion of $5 billion in FY25.

The RBI data also highlighted that net invisible receipts, including services and personal transfers, increased to $312 billion in FY26 from $264 billion a year ago, helping cushion the impact of a wider goods trade deficit.