India's current account deficit narrowed sharply to 0.9% of GDP in Q4 FY26, its lowest in over three years, down from 1.8% in Q3, as services exports surged to a record $92 billion for the full year FY26 and personal remittances inflows touched $128 billion — the highest ever received by any country in a single year. The improvement reflects India's growing integration into the global services economy and the large and growing Indian diaspora abroad.
Merchandise trade deficit widened marginally to $237 billion for FY26 as exports grew 11% but imports grew 13%, led by higher electronics, machinery and gold imports. However, the services account surplus of $168 billion and the massive remittance inflows more than offset the goods trade deficit, resulting in a comfortable current account position that required modest capital account inflows to finance.
The narrow current account deficit significantly reduces India's vulnerability to external shocks and reduces the need for the RBI to intervene heavily in the currency market. External economists have noted that India's current account dynamics are increasingly supportive of currency stability and could allow for modest rupee appreciation over the medium term as the structural surplus in the services and transfers account grows in line with the expansion of the Indian economy and diaspora.
