India’s BoP Deficit Expands to $8.1 Billion in Q1FY27: RBI
India’s Balance of Payments (BoP) witnessed a significant shift in the first quarter of 2026-27, recording an $8.1 billion deficit, primarily driven by a sharp reversal in portfolio flows, according to the Reserve Bank of India.
India’s BoP Deficit Expands to $8.1 Billion in Q1FY27
The capital account shifted from a $7.4 billion inflow to a $5 billion net outflow, largely due to a $9.6 billion net outflow in foreign portfolio investment (FPI).
The current account deficit remained broadly stable at $3.1 billion, with a widened merchandise trade deficit partly offset by an improved services surplus.
Capital Account Dynamics
Net foreign direct investment (FDI) saw a positive inflow of $7.8 billion, an increase from $4.8 billion in the previous year.
Current Account Dynamics and Market Impact
- 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.
Key Takeaways
- India’s Balance of Payments (BoP) recorded an $8.1 billion deficit in Q1FY27, a stark contrast to the $4.5 billion surplus in Q1FY26.
- The capital account shifted from a $7.4 billion inflow to a $5 billion net outflow, largely due to a $9.6 billion net outflow in foreign portfolio investment (FPI).
- Net foreign direct investment (FDI) saw a positive inflow of $7.8 billion, an increase from $4.8 billion in the previous year.
FAQs
What is the current account deficit in Q1FY27?
The current account deficit remained broadly stable at $3.1 billion, with a widened merchandise trade deficit partly offset by an improved services surplus.
What is the impact of foreign portfolio investment (FPI) on India’s BoP?
Foreign portfolio investment (FPI) recorded a net outflow of $9.6 billion, against a net inflow of $1.6 billion in Q1FY26.
What is the outlook for India’s capital account in coming quarters?
Experts anticipate a largely positive capital account in coming quarters due to 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.
Conclusion
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.
Investors and policymakers should closely monitor the developments in India’s BoP and take necessary steps to mitigate the risks associated with the current account deficit.
