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Key Points

India's services trade surplus is projected to hit a record $205-207 billion in FY26 according to a new ICRA report. The current account deficit narrowed significantly to just $2.4 billion in Q1 FY26, much lower than expected. However, US tariffs on Indian goods are expected to pressure merchandise exports in textiles and diamonds. The report cautions that the CAD may widen to over 1% of GDP if these tariffs persist through the fiscal year.

Key Points: India Services Trade Surplus Hits Record $207 Billion in FY26

  • Current account deficit narrowed sharply to $2.4B in Q1 FY26
  • Services trade surplus offsets merchandise trade deficit of $68.5B
  • US tariffs expected to pressure textiles and diamond exports
  • ICRA forecasts CAD to exceed 1% of GDP in FY26
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India's services trade surplus likely to hit record $205-207 billion in FY26: Report

India's services trade surplus projected to reach record $205-207B in FY26 despite US tariff pressures on merchandise exports, says ICRA report.

"The recently imposed 50 per cent US tariff on Indian goods is expected to exert significant pressure on India's exports - ICRA Report"

New Delhi, Sep 3

While merchandise exports are projected to remain under pressure due to US tariffs, India’s services trade surplus is expected to hit a record $205–207 billion in FY26, a report showed on Wednesday.

The country’s current account deficit (CAD) narrowed sharply to $2.4 billion (0.2 per cent of GDP) in Q1 FY26, significantly lower than the $8.6 billion deficit (0.9 per cent of GDP) recorded in Q1 FY25.

The outcome was also well below ICRA’s earlier forecast of 0.7 per cent of GDP, primarily aided by stronger-than-expected remittances and a higher services trade surplus.

Earnings from invisibles rose 19.9 per cent (year-on-year) to $66.1 billion in Q1 FY26, offsetting the merchandise trade deficit of $68.5 billion.

ICRA cautions that the CAD is set to widen in Q2 FY26 to $13–15 billion (1.5 per cent of GDP), driven by a sharp expansion in the merchandise trade deficit.

“The recently imposed 50 per cent US tariff on Indian goods is expected to exert significant pressure on India’s exports, particularly textiles, diamonds, seafood, and leather.

Should these tariffs persist through the fiscal year, ICRA expects India’s CAD to exceed 1 per cent of GDP in FY26, compared with 0.6 per cent in FY25, the report projected.

India witnessed net financial inflows of $8.1 billion in Q1 FY26, after outflows in H2 FY2025. However, reserve asset accretion moderated to $4.5 billion from $8.8 billion in Q4 FY25, the ICRA report mentioned.

Forex reserves stood at $691 billion (as on August 22). The INR depreciated 3.2 per cent against the USD in 2025 (till September 1).

ICRA expects the USD/INR to trade in the 87.0–89.0 range in the near term.

Commenting on the outlook, the report said the trajectory of the CAD will hinge critically on tariff-related developments with the US.

—IANS

- IANS

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Reader Comments

R
Rohit P
The US tariffs are really concerning though. Textiles and diamonds are major employment sectors. Government needs to negotiate better trade deals to protect our manufacturing exports.
A
Aditya G
$205 billion surplus in services is massive! Shows how our skilled workforce is competing globally. But we can't ignore the merchandise deficit - need to boost Make in India initiatives.
S
Sarah B
The remittances growth is impressive too. So many Indians working abroad are sending money home, which really helps our balance of payments. Proud of our global workforce!
V
Vikram M
While services are doing well, the projected CAD widening to 1.5% in Q2 is worrying. Hope RBI has a plan to manage the currency volatility mentioned in the report.
N
Nikhil C
The forex reserves at $691 billion give us good cushion against external shocks. But we need to diversify our export markets beyond the US to reduce dependency on any single country.

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