India’s Q1FY26 Current Account Deficit Narrows to 0.2% of GDP
Why in the news
RBI data released in September 2025 showed a far smaller current account gap for April-June 2025 than a year before.
Key facts
| Quarter | Position | Amount | % of GDP |
|---|---|---|---|
| Q1FY25 | Deficit | $8.6 billion | 0.9% |
| Q4FY25 | Surplus | $13.5 billion | 1.3% |
| Q1FY26 | Deficit | $2.4 billion | 0.2% |
About the current account
It tracks goods and services trade, net income from abroad and transfers. A deficit means outflows on these heads exceed inflows.
- Merchandise balance: oil, gold, machinery.
- Services balance: IT, BPO, tourism, shipping.
- Primary income: interest, dividends, profits paid abroad.
- Secondary income: remittances.
Causes
- Heavy import bill (crude, gold, electronics); sluggish exports.
- Global slowdown, rupee depreciation, profit repatriation.
Impact
| Short-term plus | Long-term minus |
|---|---|
| Imports support growth; shows capital goods demand | Rupee weakens; external debt rises |
| Can attract FDI and FPI | Imported inflation; reserves fall if it persists |
Policy response
- RBI: forex reserves, repo rate, external debt management.
- Government: Foreign Trade Policy, gold import curbs, PLI, Atmanirbhar Bharat.
Exam angle
- CAD = (imports + net income payments + net transfers) minus (exports + remittances).
- FEMA 1999 governs forex; Customs Act 1962 governs import duties.