Imports outpace exports, India posts $2 billion current account deficit in May

THEBUSINESSBYTES BUREAU

NEW DELHI, JULY 15, 2026

India recorded a current account deficit (CAD) of $2 billion in May 2026, as a sharp rise in imports outpaced growth in merchandise exports, according to preliminary Balance of Payments (BoP) data released by the Reserve Bank of India (RBI) on Wednesday. The country had posted a current account surplus of $0.7 billion in the corresponding month last year.

Despite the monthly deficit, India's external sector remained on a stronger footing in the opening months of FY27. The country registered a current account surplus of $2.8 billion during April-May FY27, reversing a $4.1-billion deficit recorded in the same period of the previous financial year, largely driven by higher net transfers, including robust remittance inflows.

The merchandise trade deficit widened significantly to $27.9 billion in May, compared with $22.6 billion a year earlier, reflecting stronger import demand. Merchandise exports climbed to $46.1 billion from $38.7 billion, while imports rose more sharply to $74 billion, up from $61.3 billion in May 2025.

India's services trade continued to provide a cushion, with net services exports remaining broadly stable at $15.7 billion. Meanwhile, net transfers increased to $13.6 billion, up from $10.5 billion a year ago, supported by sustained remittance inflows from overseas Indians.

On the capital account, however, pressures intensified. India recorded a net capital outflow of $2.4 billion in May, a reversal from net inflows of $3.7 billion in the year-ago period. The deterioration was largely attributed to foreign portfolio investment (FPI) outflows of $4.7 billion, compared with inflows of $1.3 billion in May 2025.

Net foreign direct investment (FDI) also slipped into negative territory, recording a marginal outflow of $0.1 billion, against an inflow of $0.9 billion a year earlier. External commercial borrowings (ECBs) registered a modest net inflow of $0.1 billion, sharply lower than the $2.4 billion recorded in the corresponding month last year.

Short-term credit to India remained supportive, with net inflows of $3.2 billion. Banking capital witnessed a net outflow of $1.1 billion, while non-resident Indian (NRI) deposits registered net inflows of $0.6 billion during the month.

Reflecting the combined impact of the current and capital account movements, India's overall balance of payments recorded a deficit of $4.4 billion in May, compared with a surplus of $4.4 billion in the same month last year. However, the deficit narrowed from $6.6 billion in April, indicating some moderation in external pressures.

For the first two months of FY27, the country's overall BoP deficit stood at $11 billion, compared with a surplus of $5 billion during the corresponding period of the previous financial year, underscoring the impact of capital outflows despite an improving current account position.