India’s Current Account Deficit Widens on Higher Trade Gap

India’s current account deficit widened to $4.2 billion, or 0.5% of GDP, in Q1 of fiscal 2026-27, from $3.4 billion, or 0.4% of GDP, a year earlier. The increase was driven by a wider goods trade deficit, which rose to $86.1 billion from $68.9 billion as imports jumped 20% to $218.0 billion amid higher energy prices, while exports grew 17.1% to $132.0 billion. The impact was partly offset by an improvement in the primary income balance, with the deficit narrowing to $10.5 billion from $13.3 billion. Meanwhile, the services surplus rose to $51.6 billion from $47.9 billion, while the secondary income surplus increased to $40.8 billion from $30.9 billion.

India recorded a current account surplus of $7.1 billion in the final quarter of the 2026 financial year, narrowing from the surplus of $13.7 billion but contrasting sharply with the market expectations that it would swing to a deficit of $15 billion. Goods deficits were expected to have grown sharply in the period as higher energy costs were set to inflate imports into the Indian economy, lifted by the war in Iran and India's partial pivot away from Russian energy to escape the mounting tariffs from the United States. The goods account recorded a deficit of $83.4 billion, widening sharply from the gap of $59.3 billion, as debits surged by 12% to $196.6 billion. Still, the services surplus widened to $60.4 billion from $53.3 billion, amid a 10% increase in credits to $111.1 billion. The secondary income surplus surged to $41.3 billion from $31.5 billion, amid a 33.9% surge in credits through workers' remittances to $33.9 billion.

India's current account widened to $13.2 billion in the December of 2025 quarter from the $11.3 billion gap on the corresponding period of the previous year. The goods account deficit widened to $93.6 billion in the period from $79.3 billion last year, lifted by a surge in imports as pressure from the US government drove Indian refiners to limit their purchase of cheap Russian oil and switch to more expensive alternatives. In the meantime, the services surplus rose to $57.5 billion from $51.2 billion.