Mumbai: India recorded a current account surplus in the January–March quarter of the financial year 2025–26, supported by robust growth in services exports that helped offset a widening merchandise trade deficit.

According to data released by the Reserve Bank of India (RBI) on Monday, the country’s current account registered a surplus of USD 7.1 billion (approximately ₹59,000 crore), equivalent to 0.7 per cent of GDP, in the fourth quarter of FY26.

However, the surplus was lower compared to USD 13.7 billion (around ₹1.14 lakh crore), or 1.4 per cent of GDP, recorded in the corresponding quarter of the previous financial year.

Services exports drive surplus

The primary driver behind the surplus was a sharp rise in net services receipts, which increased to USD 60.4 billion (nearly ₹5 lakh crore) during the quarter, up from USD 53.3 billion a year earlier.

The growth was led by strong performance in key segments such as computer services, business services, and professional consulting. India’s IT and services sector continues to remain a major contributor to foreign exchange earnings, demonstrating resilience even amid global economic uncertainties.

Experts note that the steady demand for digital services, outsourcing, and technology solutions has played a crucial role in strengthening India’s external sector.

Merchandise trade deficit widens

Despite the positive contribution from services exports, the merchandise trade deficit widened significantly during the quarter. The deficit rose to USD 83.4 billion (around ₹6.9 lakh crore) in Q4 FY26, compared to USD 59.3 billion in the same period last year.

The increase in the trade gap was primarily due to higher imports, driven by rising domestic demand and elevated global commodity prices. Sectors such as crude oil, electronics, and gold contributed to the higher import bill.

This widening deficit partially offset the gains from services exports, resulting in a lower current account surplus compared to the previous year.

Full-year current account deficit remains manageable

For the full financial year 2025–26, India posted a current account deficit (CAD) of USD 25.2 billion (approximately ₹2.1 lakh crore), equivalent to 0.6 per cent of GDP.

This compares with a deficit of USD 22.9 billion (around ₹1.9 lakh crore), also 0.6 per cent of GDP, recorded in FY25. While the absolute deficit has increased, its ratio to GDP has remained stable, indicating a controlled external position.

Economists generally consider a CAD of below 2 per cent of GDP to be sustainable for India, suggesting that the current level remains well within manageable limits.

Understanding the current account

The current account is a key indicator of a country’s external sector health. It measures the flow of goods, services, income, and transfers between a nation and the rest of the world.

A surplus occurs when total inflows exceed outflows, while a deficit indicates higher outflows than inflows. Persistent deficits can put pressure on a country’s currency and foreign exchange reserves, whereas surpluses strengthen external stability.

India has historically run a current account deficit due to its dependence on imports, particularly crude oil and capital goods.

Services sector gains importance

The latest data underscores the increasing importance of services exports in balancing India’s external accounts. As merchandise trade faces challenges from global slowdown and supply chain disruptions, services have emerged as a reliable source of foreign exchange.

India’s competitive advantage in IT, financial services, and knowledge-based industries continues to support this trend. Policymakers are also focusing on expanding service exports to new markets and sectors.

Conclusion

India’s current account surplus in the fourth quarter of FY26 reflects the strength of its services sector, even as merchandise trade pressures persist. While the surplus has moderated compared to last year, the overall external position remains stable and manageable.

Going forward, sustaining growth in services exports while addressing the widening trade deficit will be key to maintaining a balanced and resilient external sector.