India current account surplus hits $7.1bn in Q4 FY26

RBI data shows a surprise return to surplus

India posted a current account surplus of USD 7.1 billion in the January to March quarter of FY26, equivalent to 0.7% of GDP, according to Reserve Bank of India (RBI) data released on Monday. The surplus came despite a sharp widening in the merchandise trade deficit during the quarter. In the preceding quarter (October to December), India had reported a current account deficit of USD 13.2 billion, highlighting a large sequential swing.

The RBI’s numbers also show that the quarterly surplus did not change the broader pattern of an annual deficit. For the full year FY26, India recorded a current account deficit (CAD) of USD 25.2 billion, or 0.6% of GDP. In FY25, the current account deficit was USD 22.9 billion, also 0.6% of GDP, indicating that the ratio stayed unchanged even as the absolute deficit widened.

How Q4 swung from deficit to surplus

The January to March quarter is often a period when India’s external accounts can look better due to seasonal patterns in service exports and remittance inflows. In Q4 FY26, the RBI data showed that services exports and remittances helped offset a much larger merchandise trade gap. The quarter’s surplus is notable because it arrived immediately after a sizeable Q3 deficit, making the shift stand out in the year’s balance-of-payments profile.

Separate commentary in the provided material described the quarter’s surplus as unexpected, pointing to the concentration of support coming from “invisibles” such as services and personal transfers. The data points presented indicate that strong inflows “neutralized” pressure from high import volumes.

At the same time, the year-on-year comparison shows Q4 FY26 was weaker than the comparable period last year. In the same quarter of FY25, India reported a current account surplus of USD 13.7 billion (or 1.4% of GDP), about double the Q4 FY26 level.

Merchandise trade deficit widened sharply

A key feature of the Q4 FY26 data was the widening in the merchandise trade deficit. The RBI numbers showed the merchandise trade gap rose to USD 83.4 billion in Q4 FY26, up from USD 59.3 billion in the year-ago period. The material also links the wider trade deficit to disruptions and uncertainty tied to the West Asia conflict, which was cited as a factor.

This merchandise deficit matters because India’s current account typically remains in deficit due to structurally high imports, including crude oil and gold, which can exceed export revenues. The Q4 FY26 surplus therefore reflects how strongly services exports and other invisibles performed relative to the widened goods deficit.

Net invisibles supported the external balance

The RBI data cited in the material shows a sharp improvement in net invisible receipts at the full-year level. In FY26, net invisible receipts were USD 312 billion, higher than USD 264 billion in FY25. The increase was attributed primarily to net services receipts and net personal transfers, which include remittances.

This improvement in net invisibles helps explain why the annual CAD remained contained at 0.6% of GDP even when the absolute deficit widened from FY25 to FY26. It also highlights that a substantial portion of India’s external stability continues to depend on services exports and transfer inflows.

Full-year picture: deficit ratio steady, absolute deficit higher

For the full year, the RBI data shows FY26 CAD at USD 25.2 billion (0.6% of GDP) compared with FY25 CAD at USD 22.9 billion (0.6% of GDP). This combination suggests that nominal GDP growth helped keep the deficit-to-GDP ratio steady, while the absolute deficit expanded.

The Q4 FY26 surplus also does not negate the fact that India typically runs a current account deficit. The material notes that India has recorded annual surpluses only occasionally in recent years, including FY21, when pandemic-linked conditions led to a contraction in trade deficits.

Key data table: quarterly and annual current account metrics

Context from recent years: FY24 and FY25 quarter swings

The broader dataset included in the material shows similar quarter-to-quarter swings in earlier years as well. For instance, in Q4 FY24, the current account recorded a surplus of USD 5.7 billion versus a deficit of USD 8.7 billion in the previous quarter, described as the first surplus after a long stretch of deficits.

For FY24, the CAD was reported at about USD 23.0 billion (0.7% of GDP), down from USD 67.0 billion (2.0% of GDP) in FY23, with the improvement linked to a lower merchandise trade deficit and higher services exports. Separately, the material also notes that in FY25, the March quarter saw a large surplus in one set of RBI-referenced figures, alongside a full-year deficit around the same 0.6% of GDP range, again underlining the importance of services and net invisibles.

Market and policy angles investors are watching

The Q4 FY26 surplus provides a data point that India’s external financing needs stayed contained at the end of the year, even with a wider goods trade gap. But the same numbers also underline that the improvement was driven by a relatively narrow set of inflows, especially services exports and remittances.

The material also references the RBI revising its FY27 real GDP growth estimate to 6.6% from 6.9%, with “downside risk” attached. While growth and the current account are separate indicators, slower growth assumptions can influence import demand, services momentum, and investor expectations around external balances.

Analysis: what the Q4 surplus does and does not signal

The Q4 FY26 surplus is meaningful because it shows India can post a surplus even when the goods trade deficit widens sharply, provided services earnings and personal transfers remain strong. The data also illustrates how quickly the quarterly current account can turn, shifting from a USD 13.2 billion deficit in Q3 FY26 to a USD 7.1 billion surplus in Q4 FY26.

At the same time, the year-on-year drop from USD 13.7 billion surplus in Q4 FY25 to USD 7.1 billion in Q4 FY26 indicates that the external position was not as strong as the prior-year peak quarter. And the full-year USD 25.2 billion deficit confirms that the quarterly surplus was not enough to deliver an annual surplus.

Conclusion: strong services offset a wider goods gap

RBI data shows India ended FY26 with a Q4 current account surplus of USD 7.1 billion (0.7% of GDP), even as the merchandise trade deficit widened to USD 83.4 billion. For the full year, the country posted a USD 25.2 billion current account deficit, steady at 0.6% of GDP. The next set of quarterly balance-of-payments data will be watched for whether services and remittance inflows can continue to cushion the external account against a large merchandise trade gap.