India’s BoP Hits $8.1B Deficit in Q1FY27 Due to Portfolio Outflows

India’s Balance of Payments (BoP) registered an $8.1 billion deficit in the first quarter of fiscal year 2026-27 (Q1FY27). This marks a significant shift from the $4.5 billion surplus observed in the corresponding period of the previous year.

This deficit primarily resulted from a sharp reversal in portfolio flows, according to data released by the Reserve Bank of India (RBI). The capital account experienced a net outflow, contrasting sharply with an inflow in the prior year.

Understanding the Capital Account Shift

• The capital account recorded a net outflow of $5 billion in Q1FY27.
• This compares to an inflow of $7.4 billion during Q1FY26.
• The primary driver was a $9.6 billion net outflow in foreign portfolio investment (FPI).

Despite these capital account dynamics, the current account deficit remained relatively stable. It registered a deficit of $3.1 billion during the quarter.

Current Account Dynamics and Trade Figures

While the merchandise trade deficit widened considerably, a robust services surplus helped to mitigate the overall impact. Merchandise exports and imports both saw increases in June.

• The merchandise trade deficit expanded to $30.2 billion in June.
• This is up from $19.2 billion recorded in June 2025.
• Merchandise exports reached $41.2 billion, with imports growing to $71.4 billion in June.
• The services surplus rose to $17.9 billion, supported by services exports of $36.4 billion.

Monthly Reversal and Future Outlook

Despite the quarterly deficit, the overall Balance of Payments showed a positive turn in June, recording a surplus. Experts anticipate a largely positive capital account in the upcoming quarters.

Madan Sabnavis, chief economist at Bank of Baroda, noted that RBI measures are expected to boost the forex surplus. These initiatives aim to strengthen India’s external position significantly.

• The overall BoP showed a $2.9 billion surplus in June.
• RBI measures concerning Foreign Currency Non-Resident (FCNR) deposits and External Commercial Borrowings (ECBs) are anticipated.
• These measures are expected to boost the forex surplus by $30-50 billion by the end of the year.
• Net foreign direct investment (FDI) also showed a positive trend, with an inflow of $7.8 billion, up from $4.8 billion in the previous year.