India recorded a current account surplus of $13.5 billion (1.3% of GDP) in the fourth quarter of FY25 (January–March), according to preliminary data released by the Reserve Bank of India (RBI) on Friday.
This marked a notable turnaround from a deficit of $11.3 billion (1.1% of GDP) in Q3, and a significant increase from a $4.6 billion surplus in the same quarter last year.
For the full financial year 2024–25, India’s current account deficit narrowed to $23.3 billion (0.6% of GDP), down from $26.0 billion (0.7% of GDP) in FY24.
The improvement was primarily led by higher net receipts from services and secondary income.
Key drivers of the surplus
The surplus in Q4 FY25 was largely attributed to strong services exports and a lower net outflow under the primary income account.
Net services receipts rose sharply to $53.3 billion, up from $42.7 billion a year ago, driven by gains in business and computer services.
Additionally, personal transfer receipts—largely remittances from Indians abroad—increased to $33.9 billion from $31.3 billion in the corresponding quarter of FY24.
However, the merchandise trade deficit widened to $59.5 billion, up from $52.0 billion in Q4 FY24, though it improved from $79.3 billion in Q3.
The RBI data revealed subdued foreign direct investment (FDI) inflows at $0.4 billion during the March quarter, down from $2.3 billion in the same period last year.
Foreign portfolio investment (FPI) also saw a net outflow of $5.9 billion, in contrast to an $11.4 billion inflow in Q4 FY24.
On an annual basis, FDI inflows dropped sharply to $1.0 billion in FY25 from $10.2 billion in FY24.
FPI net inflows also declined significantly to $3.6 billion from $44.1 billion.
External borrowing & forex reserves
India’s external commercial borrowings (ECBs) showed a net inflow of $7.4 billion in Q4 FY25, rising from $2.6 billion a year earlier.
Meanwhile, non-resident Indian (NRI) deposits moderated to $2.8 billion, from $5.4 billion last year.
Foreign exchange reserves increased by $8.8 billion on a balance of payments basis in Q4, though this was lower than the $30.8 billion accretion seen a year earlier.
For FY25, reserves declined by $5.0 billion, compared to a robust $63.7 billion increase in FY24.
The latest RBI figures reflect improved resilience in India’s external sector, led by strength in services and remittances.
However, continued volatility in capital flows and rising trade deficits signal the need for careful monitoring in the coming quarters.
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