India’s CAD Widens to $4.2B in Q1 2026-27

India’s current account deficit (CAD) expanded to $4.2 billion, or 0.5% of its GDP, in the first quarter of the 2026-27 fiscal year. This marks an increase from the $3.4 billion recorded in the same period a year prior, according to data from the Reserve Bank of India.

The primary driver behind this widening deficit was a significant increase in the merchandise trade deficit. This deficit, representing the difference between goods imported and exported, rose substantially during the quarter.

Key figures for the merchandise trade deficit:

• Merchandise trade deficit in Q1 2026-27: $86.1 billion
• Merchandise trade deficit in Q1 2025-26: $68.9 billion

Offsetting Gains in Services and Transfers

Despite the overall widening, several other economic indicators showed positive trends, partially mitigating the impact of the trade deficit. These areas experienced notable growth over the previous fiscal year.

Positive developments include:

• Net services receipts: Increased to $51.6 billion in Q1 2026-27, up from $47.9 billion in Q1 2025-26.
• Personal transfer receipts (remittances): Rose to $42.9 billion in Q1 2026-27, compared to $33.2 billion in Q1 2025-26.
• Net foreign direct investment (FDI) inflows: Grew to $6.1 billion in Q1 2026-27, exceeding $5.2 billion from the previous year.

The improvement in net services receipts was largely propelled by strong performance in specific sectors. Key areas contributed significantly to this positive trajectory.

Sectors driving services growth:

• Computer services
• Other business services
• Transportation services

These varied movements in India’s external accounts highlight the complex interplay of global trade dynamics and domestic economic activity. The Reserve Bank of India continues to monitor these critical indicators.