India current account deficit widens to $4.2 billion in April-June quarter: RBI

India’s current account deficit widened marginally to $4.2 billion, or 0.5 per cent of GDP, in the April-June quarter of 2026-27, as higher commodity prices and a wider merchandise trade gap put pressure on the external balance, according to data released by the Reserve Bank of India on Tuesday.

The current account deficit stood at $3.4 billion, or 0.4 per cent of GDP, in the same quarter a year earlier, based on revised data. In the preceding January-March quarter, India had recorded a current account surplus of $6.5 billion.

The latest data underline a shift in India’s external balance at the start of the new financial year, with the merchandise trade deficit widening even as strong remittance inflows provided support.

Trade deficit widens

India’s merchandise trade deficit increased to $86.1 billion in the April-June quarter, compared with $68.9 billion in the year-ago period, the RBI said.

Higher commodity prices contributed to the widening trade gap, while the increase in imports relative to exports put additional pressure on the current account.

The merchandise trade balance is a key component of India’s current account, although the country’s large surplus in services and strong remittance inflows help offset a substantial part of the goods trade deficit.

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The current account also includes trade in services, primary and secondary income and transfers.

Remittances provide support

Private transfer receipts, which are largely remittances sent home by Indians working overseas, rose sharply to $42.9 billion during the quarter from an upwardly revised $33.2 billion in the corresponding period a year earlier.

The increase in remittances helped cushion the impact of the wider merchandise trade deficit on India’s current account.

India remains one of the world’s largest recipients of remittances, with overseas Indians providing an important source of foreign exchange for the country.

Balance of payments turns deficit

India’s overall balance of payments recorded a deficit of $8.1 billion in the April-June quarter, compared with a surplus of $4.5 billion in the same quarter a year earlier, according to the RBI.

The balance of payments captures the country’s overall transactions with the rest of the world, including the current account as well as capital and financial flows.

The current account deficit therefore does not by itself indicate a shortage of foreign exchange. India’s external position also depends on foreign investment, borrowing, banking capital and other financial flows.

The April-June figures come at a time when global commodity prices, trade flows and geopolitical tensions remain important factors for India’s external sector.

A sustained rise in commodity prices, particularly energy prices, can increase India’s import bill because the country remains heavily dependent on imports to meet its energy requirements.

At the same time, stronger services exports and remittances can help offset pressure from the merchandise trade deficit.

The modest size of the current account deficit at 0.5 per cent of GDP indicates that India’s external imbalance remained relatively contained in the first quarter of 2026-27, despite the deterioration from the year-ago period and the surplus recorded in the previous quarter.