India’s current account deficit (CAD) marginally widened to $4.2 billion, or 0.5% of GDP, in the first quarter of FY27 from $3.4 billion, or 0.4% of GDP, in the year-ago period, as a wider merchandise trade deficit more than offset stronger services receipts and higher transfers, according to Reserve Bank data released on Tuesday.
The balance of payments (BoP), meanwhile, turned into a deficit of $8.1 billion in Q1, compared with a surplus of $4.5 billion a year earlier, primarily due to capital outflows of $5 billion against an inflow of $7.4 billion. The financial account was also pressured by $9.6 billion in foreign portfolio investment (FPI) outflows, compared with a net inflow of $1.6 billion a year earlier.
The wider merchandise trade deficit weighed on the BoP, although the impact was partly cushioned by stronger services receipts, higher transfers and increased foreign direct investment (FDI). FDI rose to $6.1 billion in Q1 from $5.2 billion a year earlier.
The merchandise trade deficit widened to $86.1 billion in Q1 from $68.9 billion a year earlier. Merchandise exports rose to $132 billion from $112.7 billion, while imports increased to $218 billion from $181.6 billion. The trade deficit was primarily driven by petroleum, oil and lubricants (POL), for which the deficit rose to $37.6 billion from $32.2 billion.
Net services receipts increased to $51.6 billion from $47.9 billion. Services exports rose to $106.2 billion from $97.4 billion, while services imports increased to $54.6 billion from $49.5 billion.
Net secondary income, which primarily reflects personal transfers and remittances, rose to $40.8 billion from $30.9 billion. Meanwhile, net outgo under the primary income account, mainly reflecting investment income payments, declined to $10.5 billion from $13.3 billion.
On the financial account, net inflows through NRI deposits declined to $2.8 billion from $3.6 billion, while net external commercial borrowings fell to $3.3 billion from $4.4 billion.
Foreign exchange reserves declined by $8.1 billion on a balance-of-payments basis, excluding valuation effects, compared with an accretion of $4.5 billion a year earlier. Including valuation effects, forex reserves declined by $22.5 billion in Q1, compared with an accretion of $29.8 billion in the year-ago period.
The $14.4-billion valuation loss was primarily due to lower gold prices and appreciation of the US dollar against major currencies.
