India's Balance of Payments Q4 FY26: Current Account Surplus Narrows, Forex Reserves Rise

The Reserve Bank of India (RBI) released preliminary data on India's Balance of Payments (BoP) for the fourth quarter (Q4) of 2025-26, covering January to March 2026, along with the full-year picture for April–March 2025-26.

In Q4 2025-26, India recorded a current account surplus of US$ 7.1 billion, which is 0.7 per cent of GDP. This is a decline from the surplus of US$ 13.7 billion (1.4 per cent of GDP) recorded in Q4 2024-25. The shrinkage was driven mainly by a widening merchandise trade deficit, which rose sharply to US$ 83.4 billion in Q4 2025-26 from US$ 59.3 billion in the same quarter a year earlier. Partially offsetting this, net services receipts grew to US$ 60.4 billion from US$ 53.3 billion, with computer services and other business services as key contributors. Personal remittances from Indians abroad rose significantly to US$ 43.5 billion from US$ 33.9 billion a year ago, providing a strong cushion to the current account.

On the capital and financial account side, Foreign Direct Investment (FDI) recorded a net inflow of US$ 4.2 billion in Q4 2025-26, up from US$ 0.4 billion in Q4 2024-25. However, Foreign Portfolio Investment (FPI) saw a net outflow of US$ 12.0 billion, higher than the outflow of US$ 5.9 billion in the year-ago quarter. NRI deposits brought in a net inflow of US$ 3.3 billion, while net inflows under External Commercial Borrowings (ECBs) stood at US$ 3.6 billion, lower than US$ 7.5 billion in Q4 2024-25. On a BoP basis, foreign exchange reserves rose by US$ 7.2 billion in Q4 2025-26, compared to an accretion of US$ 8.8 billion in Q4 2024-25.

For the full year 2025-26, India's current account posted a deficit of US$ 25.2 billion (0.6 per cent of GDP), slightly wider than US$ 22.9 billion (0.6 per cent of GDP) in 2024-25. The merchandise trade deficit widened to US$ 337.3 billion. On the positive side, net invisibles receipts — covering services, primary income, and secondary income — rose to US$ 312.0 billion from US$ 264.0 billion, driven by services exports and personal transfers. Full-year FDI net inflows improved to US$ 6.9 billion from US$ 1.0 billion, while FPIs swung to a net outflow of US$ 16.4 billion from a net inflow of US$ 3.6 billion in 2024-25. On a BoP basis (excluding valuation effects), foreign exchange reserves depleted by US$ 23.6 billion in 2025-26, compared to a depletion of US$ 5.0 billion in 2024-25.

The RBI also released data on sources of variation in foreign exchange reserves for 2025-26. In nominal terms (including valuation effects), India's foreign exchange reserves increased by US$ 22.8 billion during 2025-26, compared to an accretion of US$ 21.9 billion in 2024-25. The key driver of this nominal increase was a large valuation gain of US$ 46.4 billion, up from US$ 26.9 billion the previous year, primarily reflecting the higher price of gold and the depreciation of the US dollar against major currencies. The capital account (net) contributed only US$ 1.8 billion in 2025-26, a sharp drop from US$ 18.0 billion in 2024-25. Within the capital account, foreign investment turned negative at -US$ 9.4 billion (from +US$ 4.5 billion), largely due to heavy FPI outflows.