India's current account deficit shrinks to $12.3B in Q2 FY26
What's the story
India's current account deficit (CAD) has narrowed significantly in the July-September quarter of fiscal year 2025-26. The CAD stood at $12.3 billion, or 1.3% of GDP, according to data released by the Reserve Bank of India (RBI) today. This is a major improvement over an upwardly revised deficit of $20.8 billion, or 2.2% of GDP, during the same period last year.
Economic factors
Merchandise trade deficit and services exports boost CAD moderation
The RBI attributed the moderation in CAD to a lower merchandise trade deficit and higher net services receipts. India's merchandise trade deficit shrank to $87.4 billion from $88.5 billion a year ago. Meanwhile, net services receipts increased to $50.9 billion in the quarter, up from $44.5 billion last year, indicating strong performance in sectors contributing significantly to India's export earnings.
Financial inflows
Private transfer receipts and balance of payments
Private transfer receipts, mainly remittances from Indians working abroad, also saw an increase. They rose to $38.2 billion in the quarter from an upwardly revised $34.4 billion last year. However, the balance of payments recorded a deficit of $10.9 billion against a surplus of $18.6 billion last year, highlighting some financial challenges despite improvements in CAD and private transfer receipts.