India has reported a significant current account surplus of $13.5 billion, or 1.3% of its Gross Domestic Product (GDP), in the fourth quarter of the fiscal year 2024-25 (January-March 2025). This positive turn, as per data released by the Reserve Bank of India (RBI) on Friday, marks a substantial improvement from a deficit of $11.3 billion (1.1% of GDP) in the preceding quarter (Q3 FY25) and a surplus of $4.6 billion (0.5% of GDP) in the corresponding period of the previous fiscal year (Q4 FY24).
The impressive surplus in the March quarter has been largely attributed to a surge in services exports and robust personal remittances from Indians working abroad. Net receipts from services increased to $53.3 billion in Q4 FY25, up from $42.7 billion a year ago. This growth was particularly strong in key categories such as business and computer services, highlighting India’s increasing prowess as a global service provider.
Furthermore, personal transfer receipts, primarily comprising remittances sent by overseas Indians, saw a healthy rise to $33.9 billion in Q4 FY25, compared to $31.3 billion in Q4 FY24. This consistent inflow of remittances continues to be a vital support for India’s external accounts.
While the merchandise trade deficit for Q4 FY25 stood at $59.5 billion, higher than $52 billion in Q4 FY24, it showed a moderation from the $79.3 billion recorded in Q3 FY25. This indicates a relatively contained goods trade imbalance despite some increases.
The net outgo on the primary income account, which largely reflects investment income payments, also moderated to $11.9 billion in Q4 FY25 from $14.8 billion in the year-ago period, further contributing to the current account’s positive balance.
Annual Perspective and Economic Implications
Despite the robust quarterly surplus, India’s current account for the full fiscal year 2024-25 remained in a deficit of $23.3 billion, or 0.6% of GDP. However, this represents a narrowing from the $26 billion deficit (0.7% of GDP) observed in 2023-24, primarily due to higher net invisible receipts throughout the year.
The financial account, a component of the overall Balance of Payments (BoP), saw some shifts in Q4 FY25. Foreign Direct Investment (FDI) recorded a net inflow of $400 million, lower than the $2.3 billion inflow in Q4 FY24. Conversely, Foreign Portfolio Investment (FPI) registered a net outflow of $5.9 billion in Q4 FY25, contrasting with a net inflow of $11.4 billion in Q4 FY24. Notably, external commercial borrowings witnessed a significant net inflow of $7.4 billion in the March quarter.
On a BoP basis, there was an accretion of $8.8 billion to India’s foreign exchange reserves in Q4 FY25, although this was lower than the $30.8 billion accretion in Q4 FY24.
Economists have largely welcomed the Q4 current account surplus, recognizing its positive implications for India’s external stability. Aditi Nayar, Chief Economist at ICRA, highlighted that while a seasonal surplus was expected, its magnitude exceeded forecasts, partly due to a surprising dip in primary income outflows. This, she noted, contributed to the overall narrowing of the current account deficit for FY25.
Looking ahead, analysts suggest that the current account might revert to a deficit in the first quarter of FY26 due to anticipated widening of the merchandise trade deficit and a potential moderation in the services trade surplus. However, the structural strengthening of India’s services exports and resilient remittances are expected to continue providing a strong buffer against external shocks, supporting a manageable current account balance in the foreseeable future.