India’s CAD widens to $4.2 billion in Q1 FY27
India's current account deficit widened to $4.2 billion in the first quarter of FY27, up from $3.4 billion in the previous year's quarter, according to data released by the Reserve Bank of India. This deficit, which equates to 0.5% of the country's gross domestic product, was primarily driven by a higher merchandise trade deficit of $86.1 billion.
The deficit in the overall balance of payments for the quarter stood at $8.1 billion. Merchandise trade deficit was primarily due to an 18% contraction in oil import volumes, though the import bill increased by 26% to $49 billion. Net services receipts grew to $51.6 billion, propelled by increased exports in computer services, other business services, and transportation services.
Foreign direct investment recorded a net inflow of $6.1 billion, while foreign portfolio investment saw a net outflow of $9.6 billion, resulting in a capital account deficit. Non-resident deposits had a net inflow of $2.8 billion, while external commercial borrowings decreased to $3.3 billion. The current account deficit was revised upwards from $3.1 billion to $4.2 billion, and the capital account deficit was adjusted to $5.5 billion, with an error and omission adjustment of $1.6 billion.
Foreign exchange reserves decreased by $8.1 billion on a balance of payments basis, though nominal terms saw a steeper decline of $22.5 billion in the first quarter.
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