India’s current account unexpectedly turned into a surplus of 0.7 per cent of GDP in the fourth quarter (Q4FY26) against a deficit of 1.3 per cent in the preceding quarter (Q3FY26) on jump in inward remittances and lower net outgo outgo on the primary income account.

Current account reflects financial transactions of a country with the rest of the world, including trade, investment and transfers.

A surplus on this account indicates that there are more inflows than outflows. A deficit indicates that there are more outlows than inflows.

The current account surplus in the reporting quarter, however, is lower than the year ago period’s 1.4 per cent.

In absolute terms, the current account surplus was at $7.1 billion against a deficit of $13.2 billion in the preceding quarter and a surplus of $13.7 billion billion in the year ago quarter.

In FY26, India’s current account deficit stood at $25.2 billion (0.6 per cent of GDP) as compared to $22.9 billion (0.6 per cent of GDP) in FY25.

Gaura Sengupta, Chief Economist at IDFC First Bank, observed that the positive surprise on the current account was largely driven by remittances, with the West Asia crisis prompting precautionary transfers of funds. The trade deficit remained range-bound as crude oil import volumes declined in March.

“We had expected the balance of payments to turn marginally positive in Q4. For FY27, we maintain our forecast of a current account deficit at 2.4 per cent of GDP, assuming an Indian crude basket of $90 per barrel. Capital inflow measures by the RBI and government will support the capital account, keeping the overall balance of payments broadly stable,” she said.

Personal transfer receipts, mainly representing remittances by Indians employed overseas, rose to $ 43.5 billion in Q4FY26 from $36.9 billion in Q3FY26 and $33.9 billion in Q4FY25.

Net outgo on the primary income account, mainly reflecting payments of investment income, decreased to $11.1 billion in Q4FY26 from $11.9 billion in Q4FY25.

Merchandise trade deficit at $83.4 billion in Q4FY26 was higher than $59.3 billion in Q4FY25. Net services receipts increased to $60.4 billion from $53.3 billion.

Net outgo on the primary income account, mainly reflecting payments of investment income, decreased to $11.1 billion from $11.9 billion.

Rahul Agrawal, Senior Economist, ICRA, said the unexpected current account surplus was largely driven by a 31 per cent year-on-year surge in the remittance inflows to a record high of $41.3 billion in the quarter, which also exceeded the Q3 FY2026 levels by a healthy 17.5 per cent.

Besides, outflows on account of primary income were also narrower vis-à-vis our expectations. Overall, the current account surplus resulted in an accretion to reserve assets in the quarter.

Looking ahead, ICRA expects the current account deficit to more-than-double in FY2027 relative to the FY2026 levels, owing to the surge in global energy prices following the West Asia conflict.

Agrawal said while the recent measures to attract capital flows by the Government and the RBI are expected to provide some respite, these may remain insufficient unless net FDI inflows improve materially from the current levels.

Published on June 8, 2026