According to RBI Report : India’s Current Account Deficit Slips to USD 2.4 Billion in Q1 FY26.
Economy Business
In a significant shift, India’s Current Account Deficit (CAD) narrowed to USD 2.4 billion—about 0.2% of GDP—during the April–June quarter of FY 2025–26, reversing from the previous quarter’s surplus and marking a substantial improvement from last year’s deficit, according to data released by the Reserve Bank of India (RBI) on 1 September 2025.
- The RBI data highlights that India’s CAD turned positive in the previous quarter (Q4 FY25) with a USD 13.5 billion surplus (1.3% of GDP), making this return to deficit noteworthy. Despite this, the magnitude of the deficit in Q1 FY26 remains muted, especially compared to the USD 8.6 billion deficit (0.9% of GDP) in Q1 of FY25, indicating resilience in India’s external sector performance.
- A key driver behind this moderation in CAD was a strong rise in services exports, which climbed to USD 47.9 billion, up from USD 39.7 billion in Q1 FY25.
Main Point :- (i) These gains were complemented by a surge in personal remittances, which reached USD 33.2 billion, compared to USD 28.6 billion a year ago—helping cushion the impact of a broader trade deficit.
(ii) However, India’s merchandise trade deficit worsened, expanding to USD 68.5 billion, from USD 63.8 billion in the corresponding period last year. This growing gap underscores rising import pressures in key sectors such as electronics and machinery, which offset some of the benefits from rising services and remittances.
(iii) Looking ahead, analysts anticipate that the CAD may widen further to around 1.2% of GDP over FY26, driven by continued trade tensions, U.S. tariff pressures, and volatility in foreign investment flows. This could exert downward pressure on the rupee, with estimated near-term exchange rates potentially ranging between â‚ą87.50 to â‚ą89 per U.S. dollar.
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