Current account deficit narrows to 1.3% of GDP

MUMBAI: India’s current account deficit narrowed to $ 12.3 billion, or 1.3% of GDP, in the Sept quarter, improving sharply from $20.8 billion, or 2.2% of GDP, a year earlier. The deficit, however, deteriorated quarter-on-quarter from $2.4 billion, or 0.2% of GDP, recorded in the June quarter. For the first half of FY26, the gap declined to $15 billion, or 0.8% of GDP, from $25.3 billion, or 1.3% of GDP, in the year-ago period.

The annual improvement reflected a modest narrowing of the merchandise trade deficit to about $87.4 billion from $88.5 billion and a rise in net services receipts to $50.9 billion from $44.5 billion, supported by higher computer services. Secondary income strengthened as personal transfer receipts (remittances by non-residents) increased to $38.2 billion from $34.4 billion. These gains were partly offset by higher primary income outflows, which rose to $12.2 billion from $9.2 billion. While net gold imports for the quarter (July-Sept 2025) at $19,029 million were lower than $20,691 million a year ago (July-Sept 2024), they were significantly higher than the previous quarter (April-June 2025) at $7,486 million.Quarter-on-quarter movements followed a contrasting trend. The merchandise trade deficit widened sharply from $68.9 billion in April-June 2025, outweighing a $3 billion improvement in the services balance and a $5.4 billion rise in secondary income. Primary income outflows eased marginally over the same period but provided little offset, resulting in a deterioration of about $9.6 billion in the current account between the first and second quarters.Financial flows were mixed. Net FDI recorded an inflow of $2.9 billion, reversing a net outflow of $2.8 billion a year earlier, while foreign portfolio investments saw a net outflow of $5.7 billion compared with a net inflow of $19.9 billion in the year-ago quarter. External commercial borrowing inflows fell to $1.6 billion from $5 billion, and NRI deposits slowed to $2.5 billion from $6.2 billion. On a balance of- payments basis, foreign exchange reserves declined by $10.9 billion, reversing an accretion of $18.6 billion a year earlier.