India's July balance of payments surplus jumps to $20.8 billion on surge in FX inflows

In July, India's balance of payments experienced a significant surplus of $20.8 billion, a sharp increase from the $0.3 billion surplus recorded in the same month last year. This surge in foreign-exchange inflows can be attributed to the Reserve Bank of India's measures aimed at attracting overseas deposits. The current account balance for July 2026 was at a deficit of $7 billion, a considerable improvement from the $3.2 billion deficit in July 2025.

The net transfers, including remittances from Indian workers overseas, rose to $13.2 billion in July, up from $12.6 billion a year prior. The capital account, encompassing foreign portfolio investments, saw an inflow of $27.7 billion in July, compared to $3.5 billion a year earlier. In June, India introduced measures to boost dollar inflows, such as discounted hedging for overseas borrowings by state-run firms and banks, and free hedging for banks to raise overseas FX deposits.

The Reserve Bank of India received a total of $136.4 billion under these schemes between June 5 and August 31, with a substantial $127 billion coming from non-resident deposits. The broader inflation and the Federal Reserve's prompting traders to increase October India rate hike bets have also contributed to the market's increased expectations of a rate hike.

India's balance of payments deficit has been a significant concern for the rupee since 2026, as the Iran war led to a sharp rise in crude oil prices and resulted in unabated capital outflows. Analysts are forecasting a near-neutral or modest surplus in the balance of payments for the fiscal year ending March 2027.