India current account surplus at $7.1bn in Q4 FY26

RBI reports a surplus despite a wider goods deficit

India recorded a current account surplus of $1.1 billion, or 0.7% of GDP, in the January to March quarter of FY26, according to data released by the Reserve Bank of India (RBI) on Monday. The surplus was supported by stronger services exports and higher remittance inflows during the quarter. The headline number matters because the current account captures how much the country earns from the rest of the world relative to what it spends. It also frames the external funding need, especially when global capital flows are volatile. In this quarter, the current account stayed in surplus even though the merchandise trade gap widened sharply. The RBI data shows that “invisibles” such as services and transfers continued to play the stabilising role.

Q4 FY26 vs year-ago quarter: what changed

The RBI data shows the surplus was lower than $13.7 billion (1.4% of GDP) recorded in the corresponding quarter of the previous year. The quarter saw a clear divergence between goods trade and services-led flows. A widening merchandise trade deficit increased pressure on the current account from the goods side. But higher net services receipts and stronger personal transfers offset a large part of that pressure. The primary income account also provided incremental support as the net outgo eased. Alongside the current account, the RBI release includes signals from the financial account, showing mixed capital flows. Together, these pieces explain why the quarter ended with a smaller, but still positive, current account balance.

Merchandise trade deficit widens to $13.4 billion

India’s merchandise trade deficit widened to $13.4 billion during the quarter, compared with $19.3 billion a year earlier. The RBI data attributes the change to higher import outgo, indicating a larger net drain from goods trade. This widening is important because the merchandise deficit is typically the largest single component pulling the current account towards deficit. A wider gap means the economy needs stronger inflows elsewhere to maintain balance. In this quarter, the goods deficit expansion was substantial in absolute terms. The impact was visible even as other components improved. The data underscores that the current account outcome was not driven by goods trade strength.

Services exports lift net services receipts to $10.4 billion

The pressure from goods trade was partly offset by a rise in net services receipts to $10.4 billion, up from $13.3 billion in the year-ago period. The RBI data points to growth in computer services and other business services exports as key drivers. Higher services receipts are crucial for India because services exports have been a durable source of external earnings. When net services receipts rise, they directly add to the current account balance. In Q4 FY26, the improvement in this component helped cushion the impact of the larger goods deficit. The increase also highlights the continuing role of services in India’s external sector. For investors tracking India’s balance of payments, this component often explains resilience during periods of weaker goods trade.

Remittances rise to $13.5 billion, supporting stability

Remittance inflows remained a key pillar of external stability during the quarter. The RBI data shows personal transfer receipts (largely money sent home by Indians working overseas) rose to $13.5 billion from $13.9 billion a year ago. These inflows fall under secondary income and typically provide steady support to the current account. In Q4 FY26, the increase was large enough to materially strengthen overall receipts. Remittances also tend to be less sensitive than portfolio flows to short-term market swings. That makes them an important buffer when capital markets see risk-off moves. The quarter’s data reinforces how transfers and services together can offset weaker goods trade performance.

Primary income outgo eases to $11.1 billion

Another supportive factor came from the primary income account. The RBI data shows net outgo under the primary income account declined to $11.1 billion from $11.9 billion in the year-ago period. While the primary income line is smaller than goods trade or services for India, it can still influence the quarterly swing. A lower net outgo means less income paid out on investments and related payments on a net basis. In a quarter where the goods deficit widened sharply, every incremental improvement in other components mattered. The easing of primary income outgo added to the cushioning effect from services and transfers. Together, these components explain why the quarter closed with a surplus despite the goods-side deterioration.

Financial account signals: FDI up, FPI outflows deepen

The RBI data also provides detail on cross-border capital flows during the quarter. Net foreign direct investment (FDI) inflows stood at $1.2 billion, higher than $1.4 billion in the year-ago period. In contrast, foreign portfolio investors (FPIs) recorded a net outflow of $12 billion, compared with a net outflow of $1.9 billion a year earlier. The divergence matters because FDI is usually viewed as more stable than portfolio flows, while FPI can reverse quickly. The quarter also saw NRI deposits register net inflows of $1.3 billion, up from $1.8 billion in the corresponding quarter of FY25. These financial account movements do not change the current account balance directly, but they shape overall external financing conditions.

Full-year FY26: larger trade deficit, stronger invisibles

On a full-year basis, the RBI data shows the merchandise trade deficit widened to $137.3 billion in FY26 from $186.9 billion a year earlier. Over the same period, net services receipts rose to $116.6 billion from $188.8 billion. Secondary income receipts increased to $143.6 billion from $123.5 billion, reinforcing the role of transfers. The RBI data shows net invisibles receipts stood at $112 billion in FY26, higher than $164 billion in the previous year, primarily on account of net services receipts and net personal transfers. On the investment side, net FDI inflows increased to $1.9 billion in FY26 from $1.0 billion in FY25. The annual numbers mirror the quarterly pattern of stronger invisibles offsetting pressure from the goods trade deficit.

Key balance of payments indicators (RBI data)

Why the mix matters for markets and policy tracking

The quarter’s composition highlights a familiar theme in India’s external accounts. The goods trade deficit can widen quickly when imports rise, which can compress the current account balance. But services exports and remittances can provide meaningful offsets, reducing the need for external financing through volatile channels. The Q4 FY26 data shows that this offset was strong enough to keep the current account in surplus even with an $13.4 billion merchandise deficit. The financial account picture also matters for market participants because it shows a split between stronger net FDI inflows and deeper net FPI outflows. Tracking that mix helps investors judge how much of external financing is stable versus market-sensitive. Overall, the RBI release points to a quarter where the current account outcome was driven less by goods trade and more by services and transfers.

Conclusion

India posted a $1.1 billion current account surplus in Q4 FY26, with higher net services receipts and remittances countering a sharp widening in the merchandise trade deficit. The surplus was smaller than the year-ago quarter’s $13.7 billion, reflecting the scale of the goods-side deterioration. Still, the data reinforces the central role of services exports, personal transfers, and a modestly lower primary income outgo in supporting the external balance. On the financial side, net FDI inflows improved while FPI outflows increased, and NRI deposit inflows rose. For FY26, the trade deficit widened, but invisibles strengthened, with net services and secondary income receipts higher than the previous year. The RBI numbers provide a clear snapshot of how India’s balance of payments is being shaped by a services-led cushion against a larger goods deficit.