India’s current account deficit (CAD) widened to $4.2 billion, or 0.5% of GDP, in the first quarter of 2026-27, compared with $3.4 billion, or 0.4% of GDP, in the year-ago period, according to preliminary data released by the Reserve Bank of India (RBI) on Tuesday.

The widening deficit was primarily driven by a higher merchandise trade gap, which increased to $86.1 billion in Q1 FY27 from $68.9 billion in the corresponding quarter of 2025-26.

However, stronger services earnings and higher remittance receipts provided some cushion. Net services receipts rose to $51.6 billion during the quarter from $47.9 billion a year earlier. Services exports recorded year-on-year growth across major segments, including computer services, other business services and transportation services.

The net outgo under the primary income account declined to $10.5 billion in Q1 FY27 from $13.3 billion in the year-ago quarter, mainly reflecting lower investment income payments, the RBI said.

Personal transfer receipts under the secondary income account, largely comprising remittances from Indians employed overseas, increased sharply to $42.9 billion from $33.2 billion a year earlier.

Capital flows

On the financial account, net foreign direct investment (FDI) inflows rose to $6.1 billion in Q1 FY27 from $5.2 billion in Q1 FY26.

Foreign portfolio investment (FPI), however, recorded a net outflow of $9.6 billion during the quarter, reversing a net inflow of $1.6 billion in the corresponding period last year.

Net inflows into non-resident deposits stood at $2.8 billion, lower than the $3.6 billion recorded in Q1 FY26. Net inflows under external commercial borrowings (ECBs) also moderated to $3.3 billion from $4.4 billion a year earlier.

India’s foreign exchange reserves declined by $8.1 billion on a balance-of-payments basis during Q1 FY27, compared with an accretion of $4.5 billion in the same quarter of the previous year, according to the RBI.