India Current Account Deficit Widens to $4.2 Billion

The Reserve Bank of India reported that the current account deficit widened to $4.2 billion, or 0.5% of GDP, in the first quarter of FY27 covering April through June 2026. This represents an increase from the $3.4 billion deficit, or 0.4% of GDP, recorded during the same period the previous year.

The widening deficit resulted primarily from a sharp increase in the merchandise trade deficit, which rose to $86.1 billion from $68.9 billion. This gap was driven by a 26% increase in the oil import bill, which reached $49 billion despite an 18% decline in oil import volumes.

Growth in net services receipts, which totaled $51.6 billion, and personal transfer receipts from overseas Indians, which rose to $42.9 billion, partially offset the trade gap. The central bank noted that services exports grew in major categories including computer services, other business services, and transportation services.

Financial accounts showed a net inflow of $6.1 billion in foreign direct investment, though this was countered by a $9.6 billion net outflow in foreign portfolio investment. As a result, foreign exchange reserves decreased by $8.1 billion on a balance of payments basis during the quarter.