India’s Current Account Deficit Widens To US$ 4.2 Billion In Q1
India’s current account deficit (CAD) widened to US$ 4.2 billion, or 0.5% of GDP, in the first quarter of 2026-27, from US$ 3.4 billion or 0.4% of GDP, in the corresponding quarter a year earlier, according to data released by the Reserve Bank of India (RBI).
The widening deficit was primarily driven by a higher merchandise trade gap. The merchandise trade deficit increased to US$ 86.1 billion during April-June 2026 from US$ 68.9 billion in the first quarter of 2025-26.
The increase in the merchandise trade deficit was partly offset by stronger services receipts and higher personal transfer inflows.
Net services receipts rose to US$ 51.6 billion in the first quarter of 2026-27, compared with US$ 47.9 billion in the same period a year earlier. The RBI said services exports increased year on year across major categories, including computer services, other business services and transportation services.
Personal transfer receipts, which largely comprise remittances sent by Indians working overseas, also recorded strong growth. Such receipts rose to US$ 42.9 billion in the first quarter from US$ 33.2 billion in the corresponding period of 2025-26.
Meanwhile, net foreign direct investment (FDI) inflows improved to US$ 6.1 billion in the April-June quarter, compared with US$ 5.2 billion in the same quarter last year.
The latest data indicate that while India’s widening merchandise trade deficit continues to put pressure on the external account, robust services exports and remittance inflows are providing a significant cushion.
For the textile and apparel industry, the higher merchandise trade deficit highlights the continuing importance of strengthening export competitiveness and reducing dependence on imported raw materials, machinery and other industrial inputs. Sustained growth in textile and apparel exports, particularly in higher-value segments, could help support merchandise export earnings and improve the country’s external balance over the longer term.
