India’s Current Account Surges To $7 Bn Surplus In Q4 - Here's Why

In a positive development for investors keen on India, the South Asian country has recorded a surplus of $7 billion or 0.7% of GDP in Q4FY26, as compared with a deficit of $15.5 billion or 1.5% of GDP in the previous quarter, according to a Bank of Baroda report. 

There is an element of “positive surprise in current account driven by remittances which went up by 17% QoQ to $41.2 billion.”

Apart from this, goods deficit moderated to $83 billion in Q4 from $ 96 billion in Q3." Both these put together explain the surplus in Q4 as against deficit in Q3. Within invisibles, outgo on account of investment income is lower at $ 11 billion in Q4 compared with $12 bn in Q3.

On YoY basis, invisible receipts increased by 24%, led by remittances (31% YoY) and services (13% YoY). These two put together drove invisible receipts higher by $17.5 billion YoY which made up for the $24 billion YoY increase in trade deficit.

While goods deficit narrowed on a QoQ basis to $83 bn, on a YoY basis it has increased from $59 bn in Q4FY25.

This is driven by 12% YoY increase in imports at $197 billion in Q4. Within this, gold imports rose materially 138% YoY along with higher non-oil non-gold imports 11% YoY.

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On the other hand, oil imports were lower -13% YoY for now. Goods exports too were relatively weak (-2.8% YoY led by both oil -13% YoY and non-oil exports -0.3% YoY.

Exports were impacted by several headwinds such as Middle East conflict and lingering impact of US tariffs.

"We do see goods exports improving led by US and then eventually because of opening up of the Strait, Bank of Baroda noted.

"For FY26, the current account deficit was steady at $25 billion (0.6% of GDP) compared with $23 billion in FY25. Notably, this is on the back of a widening goods deficit of $337 billion from $287 billion in FY25," it said.

Q4 outflows have been the highest since June 2022 and in the current quarter outflows are already $15 billion.

However, the FX swap scheme announced by RBI should change the narrative on India and thus attract inflows. At the same time, FDI inflows have improved to $4.2 billion and loans have decelerated to $0.6 billion in Q4.