India Records $13.5 Billion Current Account Surplus in March Quarter As Trade Gap Narrows: RBI Data

India's current account surplus for the final quarter of FY25 rose to 1.3% of GDP, a notable improvement from the 1.1% deficit in the preceding quarter. This increase contributed to narrowing the fiscal year's current account deficit (CAD) to 0.6% of GDP, down from 0.7% in FY24, as per Reserve Bank of India data.

Trade and Services Impact

The merchandise trade deficit for India was recorded at $59.5 billion in Q4FY25, higher than $52 billion in the same period last year but lower than $79.3 billion in Q3FY25. The reduction was aided by a boost in business and computer services, especially from GCC businesses, which helped offset the trade gap.

Net services receipts saw a significant rise, reaching $53.3 billion in Q4FY25 compared to $42.7 billion a year earlier. This growth was driven by increased exports in business and computer services sectors.

Primary Income and Investment Flows

The net outflow on the primary income account decreased to $11.9 billion in Q4FY25 from $14.8 billion in Q4FY24, mainly due to reduced investment income payments. Foreign Direct Investment (FDI) net inflow stood at $1 billion during FY25, significantly lower than the previous year's $10.2 billion.

Foreign Portfolio Investment (FPI) also saw a decline with net inflows of $3.6 billion during FY25, compared to $44.1 billion the previous year.

Expert Insights

Aditi Nayar, ICRA's chief economist, noted that while a seasonal surplus was anticipated for Q4 FY2025, its magnitude exceeded expectations due to an unexpected dip in primary income outflows during this period.

"This led to the unexpected narrowing in the CAD to 0.6% of GDP in FY2025 from 0.7% in FY2024," she stated.

The overall economic indicators suggest that India's financial health is improving with strategic growth in service sectors and controlled primary income outflows contributing positively.