India current account surplus hits $7.1bn in Q4 FY26

RBI reports a smaller surplus than last year

India reported a current account surplus of $1.1 billion in the January to March quarter of FY26, according to Reserve Bank of India (RBI) data released on Monday. The surplus worked out to 0.7% of GDP, indicating that external inflows exceeded outflows on the current account during the quarter. The latest print was lower than the surplus posted in the same period a year earlier. In the January to March quarter of FY25, the current account surplus stood at $13.7 billion, or 1.4% of GDP, as cited by PTI based on RBI data.

The data point matters because the current account is a key gauge of how India funds its trade and other external transactions, and how dependent it is on capital flows. A surplus, even a smaller one, reduces near-term pressure on external financing requirements. The RBI release also provided a broader picture of how the quarter played out across trade and services, and what that implied for the full-year position.

Key quarterly numbers at a glance

The RBI data showed that the surplus in Q4 FY26 arrived despite a substantially wider merchandise trade deficit. Reuters described the outcome as a surprise current account and balance of payments surplus, pointing to the role of services earnings and remittances.

The key point in the RBI release was the combination of a larger goods trade gap and strong “invisible” inflows. Net receipts from services rose to $10.4 billion, according to the Reuters report citing the central bank. Private transfers, which largely include remittances from Indians working abroad, also increased, supporting the overall current account outcome.

Reversal from the preceding quarter’s deficit

The March quarter surplus marked a clear reversal from the preceding quarter. The current account had recorded a $13.2 billion deficit in the previous quarter, as cited in the Reuters report and other coverage included in the provided text. That swing underscores how quickly the balance can shift based on services exports, remittance flows, and the goods trade balance.

The RBI data and Reuters coverage attributed the shift to a stronger services performance and higher remittances. Reuters also noted dollar-rupee swaps conducted by the RBI as a factor in the broader balance of payments position during the quarter.

Merchandise trade gap widens sharply

One of the most notable elements in the RBI data was the widening in the merchandise trade deficit. The merchandise trade gap rose to $13.4 billion in Q4 FY26, from $19.3 billion in the year-ago period, according to the RBI figures cited in the provided text.

A wider goods trade deficit typically acts as a drag on the current account. In this quarter, however, the hit from merchandise trade was offset by the strength of services exports and remittances. The pattern highlights how India’s external balance increasingly depends on services and transfers to cushion volatility in goods trade.

Services exports and remittances provide the offset

Despite the rise in the trade deficit, robust services exports helped India remain in current account surplus during January to March, as stated in the provided text. Reuters added that worker remittances rose, strengthening private transfers and supporting the overall surplus.

An economist cited in the Reuters report, Agrawal, attributed the better-than-expected outcome in the current account and the broader balance of payments to stronger worker remittances. While the quarter’s headline number was smaller than a year earlier, the composition showed continued reliance on services-led inflows.

Balance of payments context and RBI operations

Reuters reported that India posted a surprise balance of payments (BoP) surplus alongside the current account surplus. The same report mentioned that forex swaps conducted by the central bank were among the factors influencing the outcome. These swaps were referenced as part of the quarter’s external accounts dynamics, along with services earnings and remittances.

While the current account tracks trade in goods and services and transfer flows, the balance of payments captures the broader set of transactions that finance the current account. The mention of RBI swaps in Reuters coverage suggests the central bank’s market operations were part of the wider external sector picture during the quarter.

Full-year FY26: deficit widens in dollar terms

For the full financial year FY26, India recorded a current account deficit of $15.2 billion, or 0.6% of GDP, according to the RBI data in the provided text. This compared with a $12.9 billion deficit in FY25, which was also 0.6% of GDP.

The year-on-year comparison shows that, in dollar terms, the deficit was higher in FY26 even though the ratio to GDP remained unchanged at 0.6%. That combination can occur when nominal GDP rises alongside a larger absolute deficit.

What the data can signal for markets

For investors, quarterly current account data is often read alongside trade numbers, services exports momentum, and remittance trends. The Q4 FY26 surplus indicates that services and transfers were strong enough to counter a wider merchandise trade deficit. It also suggests that the external account position can improve quickly when “invisible” inflows accelerate, even in the face of pressure from goods trade.

The full-year deficit remaining at 0.6% of GDP keeps the headline ratio stable, but the higher dollar deficit is still a data point markets track, especially during periods of global risk-off sentiment. Any sustained widening in the merchandise trade gap without a matching rise in services and remittances could change the quarterly trajectory.

Summary table of reported RBI metrics

Conclusion

RBI data showed India posted a $1.1 billion current account surplus in Q4 FY26, smaller than the year-ago surplus but a sharp turnaround from the preceding quarter’s deficit. The quarter’s outcome was supported by services receipts and higher remittances, even as the merchandise trade gap widened. For the full year, India reported a $15.2 billion current account deficit, with the deficit ratio holding at 0.6% of GDP. Markets will watch whether services exports and remittance flows continue to offset volatility in the goods trade balance as new quarterly data is released.