India’s current account deficit narrows to 1.3% of GDP in Q2FY26: RBI

The Reserve Bank of India (RBI) in its latest data has said that the reduction in the trade deficit, higher services exports and higher remittances by the diaspora have helped the country narrow its current account deficit to $12.3 billion or 1.3% of GDP in the September quarter of the current financial year (Q2FY26).

The country’s current account deficit stood at $20.8 billion, or 2.2% of the GDP in the year-ago period. However, it was just $2.4 billion or 0.2% of the GDP in the preceding June quarter of this fiscal (Q1FY26). In the first half of FY26, the current account deficit declined to $15 billion or 0.8% of GDP from $25.3 billion or 1.3% of GDP in the year-ago period.

Further, RBI stated that the merchandise trade deficit has declined to $87.4 billion in the July-September quarter of this fiscal as compared to $88.5 billion in the same period a year ago. Meanwhile, net services receipts increased to $50.9 billion from $44.5 billion a year ago. The country’s services exports have increased, especially in computer services. Further, the personal transfer receipts under the secondary income account, mainly representing remittances by Indians employed overseas, rose to $38.2 billion in the reporting quarter from $34.4 billion in the year-ago period.

During the September quarter of FY26, the net outgo on the primary income account, mainly reflecting payments of investment income, increased to $12.2 billion from $9.2 billion in Q2 FY25.

On the foreign investment front, RBI said that the Foreign Direct Investment (FDI) in Q2 FY26 stood at $2.9 billion as against a net outflow of $2.8 billion in the corresponding period of the last fiscal. However, there was a net outflow of $5.7 billion during Q2FY26 by foreign portfolio investment (FPI) as compared to a net inflow of $19.9 billion in Q2 FY25. Besides, net inflows under external commercial borrowings reduced to $1.6 billion in Q2 FY26 from $5 billion in the year-ago period.

Moreover, there was a decline in the deposits by NRIs during the September quarter to $2.5 billion from $6.2 billion in the year-ago period. On a Balance of Payments basis, there was a depletion of $10.9 billion to the foreign exchange reserves against an accretion of $18.6 billion in Q2 FY25.

In a recent report, GTRI said India's exports to the US fell 28.5% due to aggressive tariff hikes. Weak exports due to high tariffs and higher imports have also led to immense pressure on the rupee, devaluing to its weakest level. The Indian rupee weakened to an all-time low against the US dollar in early trade on Tuesday due to a firm American currency against its major peers overseas, while strong dollar demand from importers also pressured the rupee. Moreover, persistent foreign fund outflows and elevated crude oil prices have also dented rupee sentiments. Foreign Institutional Investors sold equities worth ₹1,171.31 crore on Monday, exchange data showed.