Foreign Fund Outflows Push India’s Balance of Payments into Deficit Despite Current Account Surplus
Foreign Fund Outflows Push India’s Balance of Payments into Deficit Despite Current Account Surplus
India’s balance of payments (BOP) swung to a deficit of $6.6 billion in April 2026, reversing a surplus of $0.5 billion recorded in April 2025, as heavy selling by foreign portfolio investors overwhelmed a strengthening current account, according to the latest data.
Current Account Turns Surplus on Remittances and Services
The current account recorded a surplus of $4.7 billion in April 2026, compared with a deficit of $4.8 billion a year earlier — a swing of nearly $9.5 billion driven largely by invisible inflows.
Net transfers, comprising primarily worker remittances, surged by $6.6 billion to reach $16 billion, up from $9.4 billion. The Reserve Bank of India attributed the rise to higher remittance inflows linked to the West Asia conflict and rupee depreciation.
The services surplus also widened by $2.7 billion to $18.6 billion, supported by export growth from $32.8 billion to $37 billion. The primary income deficit narrowed by $1.1 billion to $1.9 billion.
These gains were sufficient to offset a wider merchandise trade deficit, which expanded to $27.9 billion from $27.1 billion in the same period last year.
Capital Account Deterioration Drives Overall Deficit
Despite the current account improvement, the capital account shifted to a deficit of $11.3 billion from a surplus of $5.3 billion in April 2025 — the primary driver of the overall BOP shortfall.
Foreign portfolio investment (FPI) outflows widened sharply to $8.7 billion from $2.1 billion, reflecting sustained selling pressure from overseas investors. Banking capital also reversed course, recording an outflow of $3.7 billion against an inflow of $3.3 billion a year earlier.
The data underscores a growing divergence between India’s improving trade fundamentals and the volatility of foreign capital flows — a tension that will test policymakers as global risk appetite remains uncertain.
