India's current account deficit (CAD) widened to $25.8 billion in the first half of FY27 (April-September), compared with $18 billion in the corresponding period last year, as the merchandise trade gap and net income outflows increased. However, the country's overall balance of payments (BoP) position improved significantly, recording a surplus of $66.8 billion against a deficit of $6.4 billion a year earlier, according to preliminary data released by the Reserve Bank of India (RBI) on November 13.

Key Highlights

• India's current account deficit widens to $25.8 billion in H1FY27 from $18 billion a year earlier, as the merchandise trade gap expands.
• India's balance of payments records a $66.8 billion surplus, supported by a sharp increase in banking capital inflows.

The improvement in the overall BoP position was supported by higher capital inflows, particularly through banking capital. At the same time, the widening current account deficit reflected faster growth in merchandise imports compared with exports.

India's Merchandise Trade Deficit Widens to $176.1 Billion

India's merchandise trade deficit increased to $176.1 billion in H1FY27 from $158.1 billion in the year-ago period.

Merchandise exports rose to $265.3 billion from $221.5 billion, while imports increased at a faster pace to $441.4 billion from $379.6 billion. The higher import bill contributed to the widening trade gap and pushed up the current account deficit.

The net income deficit also expanded to $32.4 billion from $25.8 billion during the period. However, stronger services exports and remittance-related transfers provided some support to the current account.

Net services exports increased to $105 billion from $98.8 billion, while net transfers, which include remittances, rose to $77.7 billion from $67.2 billion.

Banking Capital Inflows Support India's Balance of Payments

Despite the wider current account deficit, India's capital account surplus surged to $92.6 billion in H1FY27 from $11.6 billion in the corresponding period last year.

Banking capital inflows stood at $125.2 billion, compared with just $0.3 billion a year earlier. Within this category, net inflows through non-resident Indian (NRI) deposits reached $125.6 billion, significantly higher than $6.1 billion in H1FY26.

However, foreign portfolio investment (FPI) outflows increased to $10.4 billion from $4.1 billion. External commercial borrowings (ECBs) also recorded net outflows of $40.6 billion, compared with net inflows of $7.2 billion in the year-ago period.

Net foreign direct investment (FDI) remained positive, with inflows of $8.8 billion during the first half, marginally higher than $7.4 billion a year earlier.

India's Current Account Deficit Reaches $7.4 Billion in September

India's current account deficit stood at $7.4 billion in September 2026, compared with $5.2 billion in September 2025.

The merchandise trade deficit narrowed to $30 billion from $33.4 billion a year earlier. Merchandise exports increased to $45.3 billion from $36.4 billion, while imports rose to $75.3 billion from $69.8 billion.

Net services exports improved to $19.2 billion from $18.8 billion. Net transfers, however, declined to $10.9 billion from $11.5 billion. The net income deficit widened sharply to $7.6 billion from $2.2 billion in September 2025.

Capital Inflows Lift India's BoP Surplus to $8.8 Billion in September

India recorded net capital inflows of $16.2 billion in September, compared with net outflows of $0.4 billion in the corresponding month last year.

Banking capital inflows of $22.2 billion and net ECB inflows of $4.5 billion supported the improvement. Within banking capital, net NRI deposit inflows increased to $3.7 billion from $0.4 billion a year earlier.

Short-term credit to India recorded net inflows of $1.6 billion, lower than $2.5 billion in September 2025.

However, foreign portfolio investments recorded net outflows of $6.7 billion, compared with $0.6 billion in September last year. Net FDI also registered outflows of $4.9 billion, higher than the $2.3 billion outflows recorded a year earlier.

Overall, India's BoP recorded a surplus of $8.8 billion in September, reversing the deficit of $5.6 billion reported in the same month last year. The September surplus was lower than the $45.4 billion recorded in August.

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IDFC First Bank Economist Sees Improvement in India's BoP Outlook

Gaura Sen Gupta, Chief Economist at IDFC First Bank, said stronger banking capital inflows, resilient remittances and improved services exports had supported India's external account position.

"India's BoP outlook is showing signs of meaningful improvement, with the September surplus at $8.8 billion, supported by stronger-than-expected banking capital inflows of $22.2 billion. Remittances of around $12 billion and an improvement in the services surplus to $19 billion are also providing support to the external account," she said.

Sen Gupta noted that support from FCNR(B)-related inflows had ended, but pressure on the capital account appeared to be easing, partly due to lower importer hedging demand following recent RBI measures.

Looking ahead, she expects continued improvement in foreign inflows, resilient remittances and reduced dollar hedging demand to support the external account. She added that India's BoP position could improve in H2FY27, potentially moving from a mild deficit towards balance or a modest surplus. This, she said, could reduce pressure on foreign exchange reserves and keep the rupee range-bound.