India's Current Account Balance Overview
India's current account posted a significant surplus of $13.5 billion, equivalent to 1.3% of GDP, during the fourth quarter of 2024-25 (Q4FY25). This marked a shift from three consecutive quarters of deficit, primarily driven by a surge in services exports.
Quarterly and Annual Trends
- In Q4FY24, there was a current account surplus of $4.6 billion (0.5% of GDP).
- The Current Account Deficit (CAD) for Q3FY25 was $11.3 billion (1.1% of GDP).
- For FY25, CAD decreased to $23.3 billion (0.6% of GDP) from $26 billion (0.7% of GDP) in FY24.
Factors Contributing to Changes
- Net services receipts increased to $53.3 billion in Q4FY25, compared to $42.7 billion a year earlier.
- Merchandise trade deficit was $59.5 billion in Q4FY25, up from $52.0 billion in Q4FY24 but down from $79.3 billion in Q3FY25.
- Net primary income outflows decreased to $11.9 billion in Q4FY25 from $14.8 billion a year earlier.
- Private transfer receipts, mainly remittances, rose to $33.9 billion from $31.3 billion a year ago.
Foreign Exchange Reserves
The accretion to the foreign exchange reserves in Q4FY25 was $8.8 billion, significantly lower than the $30.8 billion observed in Q4FY24. For the entire FY25, there was a depletion of $5.0 billion compared to an accretion of $63.7 billion in FY24.
Future Outlook
ICRA projects that the current account will return to a deficit in the quarter ending June 2025 (Q1FY26), anticipated to be around 1.3% of GDP. This is expected due to a widening merchandise trade deficit and a moderation in the services trade surplus. For FY26, India's CAD is expected to average 1% of GDP.