India’s current account balance recorded a surplus of $ 13.5 billion (1.3% of GDP) in Q4 FY25 as compared with $4.6 billion (0.5% of GDP) a year earlier and against a deficit of $11.3 billion (1.1% of GDP) in Q3 FY25, according to data released by the Reserve Bank of India (RBI) on Friday.
Merchandise trade deficit at $59.5 billion in Q4 FY25 was higher than $52 billion in Q4 FY24. However, it moderated from $79.3 billion in Q3 FY25 data showed.
Net services receipts increased to $53.3 billion in Q4 FY25 from $42.7 billion a year ago. Services exports have risen YoY in major categories such as business services and computer services.
Net outgo on the primary income account, primarily reflecting payments of investment income, moderated to $11.9 billion in Q4 FY25 from $14.8 billion in the previous year.
As per RBI data personal transfer receipts, mainly representing remittances by Indians employed overseas, rose to $33.9 billion in Q4 FY25 from $31.3 billion in the same period last year.
In the financial account, foreign direct investment (FDI) recorded a net inflow of $0.4 billion as compared with an inflow of $2.3 billion in same period last year.
Foreign portfolio investment (FPI) recorded a net outflow of $5.9 billion in Q4 FY25 as against a net inflow of $11.4 billion a year ago. Net inflows under external commercial borrowings (ECBs) to India amounted to $7.4 billion in in the quarter, as compared to $ 2.6 billion in the same period a year ago.
Non-resident deposits (NRI deposits) recorded a net inflow of $ 2.8 billion, lower than $ 5.4 billion a year ago.
There was an accretion of $ 8.8 billion to the foreign exchange reserves (on a BoP basis) in Q4:FY25 as compared to an accretion of $ 30.8 billion a year ago.
India’s current account deficit at $ 23.3 billion (0.6% of GDP) during FY25 was lower than $ 26 billion (0.7% of GDP) during FY24 primarily due to higher net invisibles receipts.
Net invisibles receipts were higher during FY25 than a year ago on account of services and personal transfers.
Net inflow under FDI at $ 1 billion during FY25 was lower than $10.2 billion a year ago.
During FY25, FPI recorded a net inflow of $ 3.6 billion, lower than $44.1 billion a year ago. There was a depletion of US$ 5 billion in the foreign exchange reserves (on a BoP basis) during FY25.
Aditi Nayar, Chief Economist & Head – Research & Outreach, ICRA Ltd said, “While the current account balance expectedly reported a seasonal surplus in Q4FY25, the size of the same overshot our expectations, amid a surprise dip in primary income outflows in the quarter. This led to the unexpected narrowing in the CAD to 0.6% of GDP in FY25 from 0.7% in FY24.”
“Amid expectations of a widening in the merchandise trade deficit as well as a moderation in the services trade surplus in Q1 FY26 vis-à-vis Q4 FY25, we expect the current account to revert to a deficit in the ongoing quarter, printing at 1.3% of GDP. We foresee India’s current account deficit to average 1% of GDP in FY26, assuming an average crude oil price of $70/barrel for the fiscal, which is eminently manageable in spite of the prevailing global uncertainties,” she said.
Rajani Sinha, Chief Economist, CareEdge Ratings said, “India’s full-year current account deficit was contained at 0.6% of GDP in FY25 aided by upbeat services trade surplus and transfers offsetting the impact of a higher merchandise trade deficit. Exports of software and business services remained the bright spots logging double-digit growth. The capital account inflows narrowed significantly, weighed by subdued net FDI and FPI inflows as well as banking capital outflows.”
“Looking ahead, the volatile global economic environment is likely to pose a headwind for the external demand scenario. We expect India’s merchandise exports to contract by 3% in FY26 mainly due to sharper contraction in petroleum exports on expectation of lower crude oil prices,” she said.
“However, non-petroleum exports are expected to contract only marginally by 0.8%. We project oil prices to average at USD 67 per barrel in FY26. The non-petroleum imports are likely to hold up well, supported by sustained domestic economic momentum. Services exports are projected to remain resilient, registering 8% growth, though with some moderation,” she added.
“Overall, upbeat services trade surplus and healthy remittances are likely to remain supportive of the current account position. Given this background, we project the current account deficit to be at 0.9% of GDP in FY26,” she further said.
Published – June 27, 2025 09:34 pm IST
