Key Takeaways:
- Current account surplus falls to 7.1 billion dollars in Q4
- Gold imports rise sharply, impacting India’s external trade balance position
- Foreign institutional investor outflows reach 12 billion dollars in the quarter
Reserve Bank of India data on Monday shows India’s current account surplus narrows to 7.1 billion dollars in the quarter ended March 2026 due to higher gold imports and investor outflows.
Gold Imports And Investor Outflows Weigh On External Position
The Surplus Narrows declined from 13.7 billion dollars, or 1.4 percent of GDP, in the same quarter last year. Foreign institutional investor outflows rose to 12 billion dollars compared with 5.9 billion dollars, while higher gold imports and shifting trade flows influenced external balances across the period.
Gold imports rose sharply during the quarter, increasing external pressure on the current account. The gold import bill reached 22.57 billion dollars compared with 9.5 billion dollars a year earlier. Merchandise trade deficit widened to 83.4 billion dollars from 59.3 billion dollars, reflecting stronger import demand across sectors.
Foreign direct investment recorded a net inflow of 4.2 billion dollars, higher than 0.4 billion dollars in the same period last year. Non-resident deposits and external commercial borrowings also showed mixed trends, while financial account flows remained influenced by global conditions.
External commercial borrowings recorded net inflows of 3.6 billion dollars compared with 7.5 billion dollars in the same quarter last year. Higher foreign investor outflows combined with softer borrowing inflows shaped overall financial account movements, even as the foreign exchange reserves position recorded modest gains during the period.
Rising gold demand remained a key factor influencing external sector dynamics during the quarter. Alongside broader import growth, it contributed to the widening of the merchandise trade deficit. However, steady inflows from services and capital account components provided a partial offset, ensuring that the current account remained in Surplus Narrows despite increased external pressures.
Services And Remittances Support External Account Stability
Services exports increased across major categories, including computer services and business services. Net services receipts rose to 60.4 billion dollars from 53.3 billion dollars, supported by steady global demand and expansion in digital service exports.
Personal transfer inflows strengthened, rising to 43.5 billion dollars from 33.9 billion dollars in the previous year. Net invisibles increased significantly, while foreign exchange reserves rose by 7.2 billion dollars on a balance of payments basis during the quarter.
Invisibles continued to provide strong support to the external account, Surplus Narrows driven by higher services earnings and sustained personal transfer inflows. These components helped offset part of the widening merchandise trade deficit, maintaining overall balance stability despite global volatility and shifting trade conditions.
Foreign direct investment, non-resident deposits, and remittance inflows collectively supported external financing needs during the period. These inflows helped cushion the impact of portfolio outflows and a higher import bill, contributing to a stable foreign exchange reserve position and overall balance of payments resilience.
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