India current account turns surplus at 0.7% in FY26 Q4

What the RBI data showed in the March quarter

India reported a current account surplus of 0.7% of GDP in the March quarter (January to March) of FY26, according to Reserve Bank of India (RBI) data released on Monday. In absolute terms, the surplus was $1.1 billion. The surplus was lower than the year-ago quarter, when the current account posted a surplus of $13.7 billion, equal to 1.4% of GDP. Even so, the March-quarter print was notable because it marked a return to surplus after a weak preceding quarter. The shift came despite continued pressure from foreign portfolio outflows, which were described as elevated.

Reversal from the previous quarter’s deficit

The March-quarter surplus represented a sharp turnaround from the preceding quarter’s current account position. RBI data described a reversal from a $13.2 billion deficit in the prior quarter. The broader narrative from the data was that India’s “invisible” earnings, led by services and remittances, were strong enough to offset a larger goods trade shortfall. This combination drove a surprise surplus outcome for the quarter, as highlighted in the Reuters report from Mumbai dated June 8.

Trade deficit widened, but services held up

The merchandise trade gap widened materially in the March quarter. RBI data showed the merchandise trade deficit rose to $13.4 billion in Q4 FY26, compared with $19.3 billion in the year-ago period. Typically, a wider goods trade deficit would weigh on the current account. But in this quarter, the offset came from services exports and other non-merchandise flows. The data underscored that services remained the key stabiliser for India’s external balances during the January to March period.

Services and remittances drove the “invisibles” cushion

Two invisible income lines stood out in the RBI commentary referenced in the report. Net receipts from services rose to $10.4 billion in the March quarter, providing a large buffer against the wider trade gap. In addition, private transfers, largely remittances from Indians working overseas, were described as having increased significantly. Reuters also reported that the better-than-expected current account and balance of payments (BoP) outcome was attributed by Agrawal to stronger worker remittances.

Balance of payments support from forex swaps

Alongside the current account surplus, Reuters reported India posted a balance of payments surplus in the January to March quarter. One factor cited was forex swaps conducted by the RBI, including dollar-rupee swaps. These swaps were described as contributing to the overall external balance position for the quarter. The report’s framing suggested these actions helped compensate for pressure from the goods trade deficit and the broader external funding environment.

Full-year FY26: deficit widened in dollars, steady as % of GDP

For the full year FY26, India’s current account was still in deficit. RBI data showed the current account deficit (CAD) increased to $15.2 billion from $12.9 billion a year earlier. However, the CAD was steady at 0.6% of GDP in both FY26 and FY25, indicating that the nominal widening did not translate into a higher deficit relative to the size of the economy. The annual picture matters for investors because it captures the combined effects of trade flows, services earnings, income payments, and transfers across the entire financial year.

Why the March-quarter shift matters for markets

The return to a current account surplus can influence how markets interpret external vulnerability, especially when portfolio flows are described as elevated on the outflow side. The March-quarter outcome showed that services exports and remittances remained strong enough to counterbalance a much larger goods trade deficit within the quarter. It also highlighted the role of RBI operations, such as forex swaps, in shaping near-term balance of payments conditions. While the data does not eliminate risks from trade or global financial conditions, it provides a concrete quarterly snapshot of how India’s external accounts adjusted.

Key numbers at a glance

Analysis: services and remittances remain the swing factors

The quarter reinforced a pattern visible in India’s external accounts over recent years: services exports and remittances often decide whether the current account is in deficit or surplus when the goods trade gap moves sharply. In Q4 FY26, the merchandise deficit expanded to $13.4 billion, yet the current account still posted a $1.1 billion surplus. The scale of net services receipts at $10.4 billion helps explain how that balance was achieved. The Reuters report also linked the surprise outcome to higher remittances and RBI forex swaps, underlining that both private flows and policy operations can shape quarterly outcomes.

Conclusion

RBI data showed India ended Q4 FY26 with a 0.7% of GDP current account surplus, reversing the preceding quarter’s $13.2 billion deficit. The improvement came even as the merchandise trade deficit widened to $13.4 billion, supported by strong services receipts and higher remittances, alongside RBI forex swaps. For the full year FY26, the current account deficit rose to $15.2 billion but stayed at 0.6% of GDP. Markets will now track whether services exports and remittance flows stay strong enough to offset goods trade pressures in subsequent quarters.