India’s current account surplus in April masks pressure from capital outflows

India’s current account moved into surplus in the month of April, extending the resilience seen in the March quarter, but the improvement was not enough to prevent an overall balance of payments deficit as foreign portfolio outflows weighed on the capital account.

Preliminary data released by the Reserve Bank of India (RBI) showed the current account swung to a $4.7 billion surplus in April from a $4.8 billion deficit a year earlier.

The overall balance of payments, however, recorded a $6.6 billion deficit compared with a $500 million surplus in April last year. The gap was driven by capital account outflows, including foreign portfolio investment (FPI) pressure, even as remittances and services supported the current account.

The numbers capture the split running through India’s external account.

On one side, services exports and worker remittances remain strong enough to offset part of the merchandise trade deficit. On the other, volatile foreign portfolio flows can quickly overwhelm that current account cushion.

In April, net transfers, including remittances from Indians overseas, rose to $16 billion from $9.4 billion a year earlier. The capital account, however, saw an outflow of $11.3 billion compared with an inflow of $5.3 billion in April 2025.

The monthly release itself marks a change. The RBI, which had earlier published balance of payments data on a quarterly basis, will now release the figures monthly with a lag of 45 days or less.

The April surplus came after a stronger-than-expected January-March quarter. India posted a current account surplus of $7.1 billion, or 0.7% of gross domestic product (GDP), in the final quarter of FY26 against a $13.2 billion deficit in the October-December quarter. For FY26 as a whole, the current account deficit stood at $25.2 billion, or 0.6% of GDP.

The March-quarter surplus was led by services and remittances. Net services receipts rose to $60.4 billion from $53.3 billion a year earlier, while private transfer receipts, mainly remittances by Indians working overseas, increased to $43.5 billion from $33.9 billion.

The merchandise trade deficit widened to $83.4 billion from $59.3 billion, pointing to how India’s goods trade remains the main drag on the current account.

India’s software, business services and remittance engines have allowed the economy to run relatively modest current account deficits despite a persistent goods trade gap.

The model works when services exports are strong, oil prices are contained and capital flows are stable.

The situation in the Middle East is the clearest near-term risk. India imports a large share of its crude, LNG and LPG needs, and disruption around the Strait of Hormuz has already raised shipping, insurance and energy cost concerns.

India’s balance of payments deficit was expected to widen in the current financial year because of a higher energy import bill after the Iran war pushed up crude prices, though measures to draw dollars from non-resident Indians through subsidized swap schemes could improve the picture.

That leaves the rupee in a complicated position. A current account surplus normally supports the currency because it means the country is earning more from trade in goods, services and transfers than it is paying out. But if capital outflows are larger, the overall external balance can still deteriorate. In April, the current account improved, but the balance of payments slipped into deficit because money left through the capital account.

Foreign portfolio flows are often the swing factor. In the March quarter, foreign portfolio investment recorded a net outflow of $12 billion, higher than the $5.9 billion outflow a year earlier. In April, the capital account again showed pressure.

For policymakers, the April data offers both comfort and warning. India’s services and remittance base is still strong, but the warning is that a good current account number can coexist with broader external stress. Headline talk of a surplus may therefore mislead unless it is read alongside the capital account and reserve changes.

The shift to monthly BoP data should improve the policy debate. Quarterly data often arrive too late to capture fast-moving shifts in oil, portfolio flows or trade. Monthly data will give economists and markets a quicker sense of whether pressures are passing through the goods account, services, transfers or capital flows, analysts said.