The report stated that for the full financial year 2025-26, India registered a current account deficit of 25.2 billion dollars, or 0.6 percent of GDP, compared with a current account deficit of 22.9 billion dollars during the financial year 2024-25.
According to the Reserve Bank of India, the merchandise trade deficit widened sharply to 83.4 billion dollars during the January-March quarter of 2025-26 from 59.3 billion dollars recorded during the corresponding quarter of the previous financial year. Despite the higher trade deficit, the country’s external position was supported by strong performance in the services sector.
Net services receipts increased to 60.4 billion dollars during the fourth quarter of 2025-26, compared with 53.3 billion dollars recorded in the same quarter of the previous financial year. The rise in services earnings played a crucial role in offsetting the impact of the expanding merchandise trade deficit and contributed to the quarterly current account surplus.
The report further revealed that foreign direct investment recorded a net inflow of 4.2 billion dollars during the January-March quarter of 2025-26. On an annual basis, net foreign direct investment inflows increased substantially to 6.9 billion dollars during the financial year 2025-26, compared with 1.0 billion dollars during 2024-25.
In contrast, foreign portfolio investment registered a net outflow of 12.0 billion dollars during the fourth quarter of 2025-26. For the entire financial year, foreign portfolio investment recorded net outflows of 16.4 billion dollars, marking a reversal from net inflows of 3.6 billion dollars recorded during the previous financial year.
The Reserve Bank of India also reported that foreign exchange reserves increased by 7.2 billion dollars during the January-March quarter of 2025-26. However, for the financial year as a whole, foreign exchange reserves declined by 23.6 billion dollars on a Balance of Payments basis, compared with a depletion of 5.0 billion dollars during the previous financial year.
The latest Balance of Payments data highlights the resilience of India’s external sector during the final quarter of 2025-26, with higher services receipts and sustained foreign direct investment inflows helping the country achieve a current account surplus despite a widening merchandise trade deficit and continued foreign portfolio investment outflows.
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