India posts USD 2 billion current account deficit in May as merchandise trade gap widens: RBI
New Delhi, July 16
India recorded a current account deficit of USD 2 billion in May 2026 as a wider merchandise trade gap offset healthy net services receipts and transfers, according to the Reserve Bank of India's preliminary Balance of Payments data. Despite the monthly deficit, the country posted a current account surplus of USD 2.8 billion during the April-May 2026 period.
The RBI data showed that the merchandise trade deficit widened to USD 27.9 billion in May 2026 from USD 22.6 billion in the corresponding month of last year. Merchandise exports rose to USD 46.1 billion from USD 38.7 billion, while imports increased to USD 74 billion from USD 61.3 billion over the same period.
Net services receipts remained largely unchanged at USD 15.7 billion in May 2026 compared with USD 15.8 billion a year ago. Net transfers increased to USD 13.6 billion from USD 10.5 billion, while net income outflows rose to USD 3.4 billion from USD 3 billion in May 2025.
During April-May 2026, the current account registered a surplus of USD 2.8 billion, reversing a deficit of USD 4.1 billion recorded in the corresponding period of the previous year. Over the two-month period, the merchandise trade deficit widened to USD 55.9 billion, while net services receipts rose to USD 34.3 billion and net transfers increased to USD 29.6 billion.
On the capital account, India recorded net capital outflows of USD 2.4 billion in May 2026. Net foreign direct investment (FDI) stood at negative USD 0.1 billion, while foreign portfolio investment (FPI) registered net outflows of USD 4.7 billion during the month. Net short-term credit to India, however, remained positive at USD 3.2 billion.
According to the RBI, the overall balance of payments recorded a deficit of USD 4.4 billion in May 2026, compared with a surplus of USD 4.4 billion in May 2025. For the April-May 2026 period, the overall balance showed a deficit of USD 11 billion against a surplus of USD 5 billion in the corresponding period of the previous year.
— ANI
Reader Comments
Interesting numbers. Imports are growing faster than exports, which is a classic sign of domestic demand. India's rising middle class is clearly consuming more foreign goods. Net transfers of USD 13.6 billion is impressive - NRIs still sending money back home in huge volumes.
The FPI outflows of USD 4.7 billion in May are concerning - foreign investors seem jittery about global uncertainty. But the positive FDI figure and USD 3.2 billion short-term credit inflow show confidence remains. Need more policy stability to attract long-term capital. 🇮🇳
India's trade deficit widening to USD 27.9 billion is a red flag for the rupee. The overall BoP deficit of USD 4.4 billion means RBI is burning forex reserves. Let's hope this is temporary and exports pick up in the coming months with global demand recovery.
Honestly, this deficit is manageable. The surplus in April-May shows we're on track. Our IT exports and remittances are strong. The real worry is the overall BoP deficit of USD 11 billion for April-May - seems like capital flight is happening. Time for sensible policy.
Why is no one talking about the USD 3.4 billion income outflows? That's dividends and profits going abroad - foreign companies taking money out of India. Also, net FDI being negative USD 0.1 billion is not a good sign. Hope the government addresses these structural issues.
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