India’s Current Account Deficit Widens To $4.2 Billion In Q1 FY27

India’s current account deficit (CAD) widened to $4.2 billion, or 0.5% of gross domestic product (GDP), in Q1 FY27, from $3.4 billion, or 0.4% of GDP, a year earlier, according to the Reserve Bank of India (RBI) data released on Tuesday.

The increase came as the merchandise trade gap expanded, although stronger services receipts offered some support. The quarter also saw $9.6 billion in foreign portfolio investment (FPI) outflows, while the overall balance of payments recorded a deficit of $8.1 billion.

What Drove India’s CAD Higher In Q1 FY27?

The merchandise trade deficit was the biggest pressure point during the quarter. It rose to $86.1 billion, compared with $68.9 billion in the corresponding period last year.

The increase was largely linked to the oil import bill. Oil imports rose 26% to $49 billion, even as import volumes declined 18%.

Services provided some relief to the external account. Net services receipts increased to $51.6 billion from $47.9 billion a year earlier. The RBI said services exports grew across major categories, including computer services, other business services and transportation services.

How Did Capital Flows And Forex Reserves Change?

The financial account saw mixed movement across major components.

Foreign direct investment recorded a net inflow of $6.1 billion, compared with $5.2 billion in Q1 FY26. FPI, however, moved in the opposite direction, with a net outflow of $9.6 billion, against a net inflow of $1.6 billion in the year-ago period.

Non-resident deposits brought in a net $2.8 billion, lower than the $3.6 billion recorded previously. Net inflows through external commercial borrowings also declined to $3.3 billion from $4.4 billion.

The RBI also revised its earlier estimates. The current account deficit was revised to $4.2 billion from $3.1 billion, while the capital account deficit was revised to $5.5 billion from $5 billion. After accounting for errors and omissions of $1.6 billion, the current account balance stood at $3.9 billion.

Foreign exchange reserves fell by $8.1 billion on a balance of payments basis during the quarter. The reserve position was weaker when measured in nominal terms.

What Could It Mean For The Indian Stock Market?

The wider current account deficit comes with a much bigger merchandise trade gap. That could put pressure on the rupee and companies that depend heavily on imports, including oil, gas and chemicals. Higher crude costs could also weigh on oil marketing companies (OMCs) and airlines.

FPI selling and lower forex reserves may keep the market volatile, while financial and rate-sensitive stocks could remain under pressure.

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