Remittances surge: Q1 inflows touch $33.2 billion; CAD narrows sharply

India recorded a surge in remittances and services exports in the first quarter of the current fiscal, helping narrow the current account deficit (CAD), according to a report by Crisil.The report stated that remittances climbed to $33.2 billion in Q1 of FY26, compared with $28.6 billion a year earlier. Services exports also grew to $97.4 billion in the same period, up from $88.5 billion last year. As per news agency ANI, India’s CAD narrowed to $2.4 billion, or 0.2 per cent of GDP, in Q1 of FY26, sharply lower than $8.6 billion, or 0.9 per cent of GDP, in the same quarter of FY25. Financial flows remained net positive at $13.2 billion, higher than the CAD, leading to an accretion in foreign exchange reserves. However, these inflows were lower than $16.6 billion in the year-ago quarter due to easing in net foreign direct investment (FDI) and non-resident Indian (NRI) inflows.FDI inflows rose to $27.2 billion from $23.9 billion, but higher outflows of $22.2 billion, up from $17.7 billion, reduced net additions. Net foreign portfolio investment (FPI) inflows touched $1.6 billion, with equity inflows turning positive at $5.4 billion against outflows of $1 billion last year. Debt, however, recorded net outflows of $2.9 billion compared with inflows of $1.9 billion a year ago. Net external commercial borrowing (ECB) flows improved to $3.7 billion from $1.6 billion, suggesting corporates tapped favourable overseas borrowing terms.India had received a record $135.46 billion in remittances during FY25, making it the world’s largest recipient for over a decade. RBI data showed remittances made up more than 10% of total gross current account inflows, while nearly half of India’s merchandise trade deficit was financed by diaspora inflows. According to RBI research, the US, UK, and Singapore together account for 45% of India’s remittances, reflecting the rising share of skilled migrants in developed economies, while dependence on GCC nations has declined.Crisil also flagged that despite the Reserve Bank’s rate-easing cycle beginning in February 2025, transmission to marginal cost of lending rate (MCLR)-based loans remains incomplete. Looking ahead, the report projected that the second quarter may see equity outflows but inflows in the debt segment.