India’s current account balance recorded a more than expected surplus of $13.5 billion in Q4 (January-March) of FY25, buoyed by robust increase in net services receipts and net inflows under external commercial borrowings (ECBs) even as merchandise trade deficit widened.

The current account balance (CAB) had recorded a surplus of $4.6 billion in the year ago period and a deficit of $11.3 billion in Q3 (October-December) of FY25.

Current account balance captures the net flow of money that results from India engaging in international trade, net primary income, and net secondary income. A surplus in the current account occurs when inflows exceed outflows.

In percentage terms, the CAB stood at 1.3 per cent of GDP against 0.5 per cent in the year ago quarter and 1.1 per cent in the preceding quarter.

That the CAB surplus is higher than expected is underscored by the fact that India Ratings and Research (Ind-Ra) had estimated it at around 7billion (0.7 per cent of GDP) in the reporting quarter.

Overall, India’s current account deficit at $23.3 billion (0.6 per cent of GDP) during 2024-25 was lower than $26.0 billion (0.7 per cent of GDP) during 2023-24, primarily due to higher net invisibles receipts, RBI said in a statement.

Aditi Nayar, Chief Economist & Head - Research & Outreach, ICRA, said: “While the current account balance expectedly reported a seasonal surplus in Q4FY2025, the size of the same overshot our expectations, amid a surprise dip in primary income outflows in the quarter. This led to the unexpected narrowing in the CAD to 0.6 per cent of GDP in FY2025 from 0.7 per cent in FY2024.”

Merchandise trade deficit increased to $59.5 billion in Q4FY25 from $52 billion in the year ago period. However, it moderated from $79.3 billion in Q3:2024-25.

Net services receipts increased to $53.3 billion in Q4FY25 from $ 42.7 billion a year ago. RBI noted that services exports have risen on a year-on-year (yoy) basis in major categories such as business services and computer services.

Net outgo on the primary income account, primarily reflecting payments of investment income, moderated to $11.9 billion in Q4FY25 from $14.8 billion in Q4FY24.

Personal transfer receipts, mainly representing remittances by Indians employed overseas, rose to $33.9 billion in Q4FY25 from $ 31.3 billion in Q4FY24.

FDI & FPI

In the financial account, foreign direct investment (FDI) recorded a lower net inflow of $0.4 billion in Q4FY25 as compared to an inflow of $2.3 billion in the corresponding year ago period.

Foreign portfolio investment (FPI) recorded a net outflow of $5.9 billion in Q4FY25 as against a net inflow of $11.4 billion in Q4FY24.

ECBs and NRI deposits

Net inflows under external commercial borrowings (ECBs) to India amounted to $7.4 billion in Q4FY25, as compared to $2.6 billion in the corresponding period a year ago.

Non-resident deposits (NRI deposits) recorded a net inflow of $2.8 billion in Q4FY25, lower than US$ 5.4 billion a year ago.

ICRA’s Nayar observed that amid expectations of a widening in the merchandise trade deficit as well as a moderation in the services trade surplus in Q1 (April-June) FY26 vis-à-vis Q4FY2025, the current account could revert to a deficit in the ongoing quarter, printing at 1.3 per cent of GDP.

“We foresee India’s current account deficit to average 1 per cent of GDP in FY2026, assuming an average crude oil price of $70/barrel for the fiscal, which is eminently manageable in spite of the prevailing global uncertainties,” she said.

Published on June 27, 2025