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India’s balance of payments (BoP) recorded an $8.1 billion deficit in the first quarter of 2026-27 (Q1FY27), against a $4.5 billion surplus in Q1FY26, as a sharp reversal in portfolio flows pushed the capital account into a net outflow, according to data released by the Reserve Bank of India (RBI) on Friday.
The current account deficit stood at $3.1 billion during the quarter, broadly unchanged from $2.9 billion in the corresponding period. The capital account, however, recorded a net outflow of $5 billion, compared with an inflow of $7.4 billion in Q1FY26.
The current account deficit widened to $6.2 billion in June from a $1.2 billion surplus in June 2025, as the merchandise trade deficit increased to $30.2 billion from $19.2 billion. Merchandise exports rose to $41.2 billion from $35.3 billion, while imports increased to $71.4 billion from $54.5 billion.
The higher merchandise deficit was partly offset by an improvement in the services surplus, which rose to $17.9 billion in June from $16.2 billion. Services exports increased to $36.4 billion from $32.1 billion, while imports rose to $18.5 billion from $15.9 billion.
NRI deposits recorded a net inflow of $1.4 billion in June, compared with $1.7 billion in June 2025. The overall BoP, however, turned positive in June, recording a $2.9 billion surplus against a $400 million deficit in the corresponding month.
“While the current account may remain pressurized in the coming quarters, the capital account will be largely positive due to the RBI measures on FCNR and ECBs that will bring about an increment in forex surplus in BOP of $30-50 bn by the end of the year,” said Madan Sabnavis, chief economist, Bank of Baroda.
On the current account, the merchandise trade deficit widened to $85.7 billion in April-June from $68.9 billion in Q1FY26. Merchandise exports rose to $132.2 billion from $112.7 billion, while imports increased to $218 billion from $181.6 billion.
The wider merchandise deficit was partly offset by an increase in the services surplus, which rose to $52.2 billion from $47.9 billion. Services exports increased to $106.7 billion from $97.4 billion, while imports rose to $54.5 billion from $49.5 billion.
For the quarter, foreign portfolio investment (FPI) recorded a net outflow of $9.6 billion, against a net inflow of $1.6 billion in Q1FY26. Investments into India by portfolio investors recorded a net outflow of $8.6 billion, compared with a net inflow of $2.5 billion in the corresponding quarter.
Net foreign direct investment (FDI), however, saw an inflow of $7.8 billion, up from $4.8 billion. FDI inflows into India rose to $17.2 billion from $13.9 billion, while investments abroad increased to $9.4 billion from $9.2 billion.
Banking capital recorded a net inflow of $3.5 billion during the quarter, compared with an outflow of $1.6 billion in Q1FY26. Non-resident Indian (NRI) deposits contributed a net inflow of $2.8 billion, compared with $3.6 billion in April-June 2025.
Short-term credit to India recorded a net inflow of $3.5 billion, against an outflow of $100 million in Q1FY26. External commercial borrowings recorded a net outflow of $100 million, compared with an inflow of $5.3 billion in the corresponding quarter.
Net transfers rose sharply to $41.4 billion during the quarter from $30.9 billion, while net income outflow narrowed to $11.1 billion from $12.8 billion.
The $8.1 billion overall BoP deficit during the quarter was reflected in monetary movements of $8.1 billion, indicating a decline in reserves during the period.
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