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India Current Account Deficit Widens to $3.1 Billion as Trade Gap Hits $85.7 Billion
Author
Shoonya Team
India’s current account deficit widened in the April-June quarter of FY27, according to RBI balance of payments data. The gap widened as merchandise imports outpaced outbound shipments, while services earnings and remittances softened the pressure on the external account.
Q1 FY27 Balance of Payments: Key Numbers
| Balance of Payments Item | Q1 FY27 | Q1 FY26 |
|---|---|---|
| Current Account Deficit | $3.1 billion | $2.9 billion |
| Merchandise Trade Deficit | $85.7 billion | $68.9 billion |
| Merchandise Exports | $132.2 billion | $112.7 billion |
| Merchandise Imports | $218 billion | $181.6 billion |
| Net Services Receipts | $52.2 billion | $47.9 billion |
| Net Transfers | $41.4 billion | $30.9 billion |
Why the Merchandise Trade Gap Widened to $85.7 Billion
The primary pressure on the external account came from the goods trade side. Imports expanded more sharply than exports during the quarter, pushing the merchandise deficit from $68.9 billion in Q1 FY26 to $85.7 billion in Q1 FY27.
Merchandise imports rose to $218 billion from $181.6 billion, while outbound shipments grew to $132.2 billion from $112.7 billion.
How Services and Remittances Limited the Deterioration
The current account deficit did not widen more sharply because two offsetting flows remained strong:
- Net services receipts improved to $52.2 billion from $47.9 billion. Services exports rose to $106.7 billion from $97.4 billion, while inbound services payments also increased to $54.5 billion from $49.5 billion
- Net transfers, largely remittances, jumped to $41.4 billion from $30.9 billion in the year-ago quarter
Capital Account Swings From Surplus to Deficit
The capital account posted a $5 billion deficit in Q1 FY27, compared with a $7.4 billion surplus a year earlier. That reversal pushed the overall balance of payments into an $8.1 billion deficit, against a $4.5 billion surplus in Q1 FY26.
One bright spot within the capital account was foreign direct investment. Net FDI improved to a nine-quarter high of $7.8 billion from $4.8 billion, with inflows rising to $17.2 billion from $13.9 billion and outward FDI staying broadly steady at $9.4 billion.
Emkay Global Cuts FY27 Current Account Deficit Forecast
Madhavi Arora, chief economist at Emkay Global, said preliminary Q1 FY27 data showed the current account deficit worsening sequentially to around $3.3 billion, or 0.3% of GDP. She attributed the sequential deterioration to higher oil imports and lower services exports.
Arora revised her FY27 current account deficit forecast to 1.3% of GDP, assuming Brent crude averages $85 a barrel. Her earlier projection of 1.7% of GDP was based on oil averaging $90 a barrel.
Why Oil, Gold and Semiconductors Are the Key Import Risks Ahead
The chief economist flagged three categories that could push the import bill higher in the coming quarters:
- Oil and gold import values are expected to rise meaningfully during FY27 despite lower volumes
- Higher semiconductor prices pose an upside risk to electronics imports
- Global price movements in these categories can shift the trade deficit quickly, even without a matching rise in import volumes
Final Outlook
India’s Q1 FY27 external account showed a familiar pattern. A larger goods trade gap widened the headline deficit, while services and remittance flows prevented a sharper deterioration. Global crude prices, gold imports, semiconductor costs, and whether capital flows recover enough to offset trade pressures will be the key variables shaping the next few quarters of external account data.
Source: Moneycontrol
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