India's current account deficit widens to $4.2 billion in Q1

India’s current account deficit (CAD) widened to $4.2 billion, or 0.5% of GDP, in the first quarter of the 2026-27 fiscal year, up from $3.4 billion in the same period last year. According to data from the Reserve Bank of India, the widening deficit was driven by a sharp increase in the merchandise trade deficit, which rose to $86.1 billion from $68.9 billion a year ago. This trade gap was largely influenced by higher costs in petroleum, oil, and lubricants.

The Balance of Payments (BoP) turned into a deficit of $8.1 billion during the quarter, compared to a surplus of $4.5 billion in the previous year. This shift was primarily due to capital outflows totaling $5 billion. Specifically, foreign portfolio investment (FPI) saw a net outflow of $9.6 billion, a significant reversal from the $1.6 billion net inflow recorded in the year-ago quarter.

These pressures were partially offset by growth in other sectors. Net services receipts increased to $51.6 billion, supported by rises in computer, business, and transportation services. Additionally, personal remittances under secondary income rose to $42.9 billion, and foreign direct investment (FDI) saw a net inflow of $6.1 billion, up from $5.2 billion in the prior year.