According to Crisil, India's remittances and service exports increased in the first quarter of the current fiscal year, helping to reduce the current account deficit (CAD).

According to the report, remittances increased to $33.2 billion in the first quarter of FY26, from $28.6 billion the previous year. Services exports increased to $97.4 billion in the same period, up from $88.5 billion the previous year.

Key Highlights

• India’s Q1 personal remittances rose to $33.2 billion, helping narrow the current account deficit.
• Q1 current account deficit fell sharply to $2.4 billion (0.2% of GDP), down from $8.6 billion year-ago.

According to news agency ANI, India's CAD fell to $2.4 billion, or 0.2% of GDP, in Q1 FY26, a significant decrease from $8.6 billion, or 0.9% of GDP, in the same quarter of FY25.

Financial flows remained net positive at $13.2 billion, outpacing the CAD, resulting in an increase in foreign exchange reserves. However, these inflows were lower than $16.6 billion in the same quarter last year due to a decrease in net foreign direct investment (FDI) and non-resident Indian (NRI) inflows.

FDI inflows increased to $27.2 billion from $23.9 billion, while higher outflows of $22.2 billion, up from $17.7 billion, reduced net additions. Net foreign portfolio investment (FPI) inflows reached $1.6 billion, with equity inflows turning positive at $5.4 billion compared to outflows of $1 billion last year.

However, debt saw net outflows of $2.9 billion, compared to inflows of $1.9 billion the previous year. Net external commercial borrowing (ECB) flows increased to $3.7 billion from $1.6 billion, indicating that corporations took advantage of favourable overseas borrowing terms.

India received a record $135.46 billion in remittances in FY25, making it the world's largest recipient for more than a decade. According to RBI data, remittances accounted for more than 10% of total gross current account inflows, and diaspora inflows financed nearly half of India's merchandise trade deficit.

According to RBI data, the US, UK, and Singapore account for 45% of India's remittances, reflecting a growing share of skilled migrants in developed economies, while reliance on GCC countries has decreased.

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Crisil also noted that, despite the Reserve Bank's rate easing cycle beginning in February 2025, transmission to MCLR-based loans remains incomplete.

According to the report, equity outflows may occur in the second quarter, but debt inflows are expected.