India recorded a current account deficit (CAD) of $2 billion in May 2026, compared with a surplus of $0.7 billion in the same month last year, as a sharp increase in merchandise imports outpaced export growth, according to preliminary balance of payments data released by the Reserve Bank of India (RBI).The country's merchandise trade deficit widened to $27.9 billion in May 2026 from $22.6 billion a year earlier. Merchandise exports rose to $46.1 billion from $38.7 billion, while imports surged to $74 billion from $61.3 billion during the period.Net services exports remained broadly stable at $15.7 billion in May 2026, compared with $15.8 billion a year ago. Services exports stood at $33.4 billion, while services imports increased to $17.6 billion.Net transfers, a key component supported by remittances, increased to $13.6 billion in May from $10.5 billion a year earlier, helping cushion the impact of the wider merchandise trade gap. Net income outflows stood at $3.4 billion.For the first two months of FY27 (April-May 2026), India reported a current account surplus of $2.8 billion, reversing a deficit of $4.1 billion recorded in the corresponding period of the previous year. The improvement was driven by higher exports and stronger net transfers.On the capital account, India recorded a net outflow of $2.4 billion in May 2026, compared with a net inflow of $3.7 billion in May 2025. Foreign portfolio investment (FPI) witnessed a net outflow of $4.7 billion during the month, while net foreign direct investment (FDI) was marginally negative at $0.1 billion.Net FDI inflows into India stood at $2.4 billion in May, while overseas investments by Indian entities amounted to an equivalent $2.4 billion.External commercial borrowings (ECBs) recorded a modest net inflow of $0.1 billion, while short-term credit to India registered a net inflow of $3.2 billion. Banking capital showed a net outflow of $1.1 billion, including net NRI deposit inflows of $0.6 billion.As a result of the current account deficit and capital outflows, India's overall balance of payments posted a deficit of $4.4 billion in May 2026, compared with a surplus of $4.4 billion in May 2025. This led to a corresponding drawdown in foreign exchange reserves during the month.
India posts $2 billion current account deficit in May as trade gap widens
India experienced a significant current account deficit of $2 billion in May 2026, primarily driven by a surge in merchandise imports that greatly expanded the trade deficit from the previous year. Although net services exports remained stable and net transfers bolstered the economy somewhat, the month saw considerable outflows in foreign portfolio investments, leading to an overall balance of payments deficit and a reduction in foreign exchange reserves.
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