India’s balance of payments (BoP) remained in deficit for a second consecutive month in May, although the shortfall narrowed to $4.4 billion from $6.6 billion in April, as sustained foreign capital outflows and a wider current account deficit weighed on the country’s external balances, according to preliminary Reserve Bank of India (RBI) data released on Wednesday.The country’s overall BoP stood at a $4.4 billion deficit in May, compared with a $4.4 billion surplus in the same month last year.
The current account slipped into a $2 billion deficit in May from a $700 million surplus a year earlier, as a sharp rise in merchandise imports outpaced export growth. Merchandise trade deficit widened to $27.9 billion from $22.6 billion a year ago. Merchandise exports rose to $46.1 billion, while imports climbed to $74 billion.
Net services exports remained broadly steady at $15.7 billion, while net transfers, largely comprising remittances from Indians working overseas, increased to $13.6 billion from $10.5 billion a year earlier, helping cushion the impact of the wider merchandise trade gap. Net income outflows stood at $3.4 billion.The capital account recorded a $2.4 billion net outflow in May, compared with a $3.7 billion net inflow in the year-ago period. Foreign portfolio investment (FPI) saw a $4.7 billion net outflow, reversing an inflow of $1.3 billion a year earlier, while net foreign direct investment (FDI) also turned negative with a $100 million outflow, compared with a $900 million inflow in May 2025.For the first two months of FY27 (April-May 2026), India posted a current account surplus of $2.8 billion, compared with a $4.1 billion deficit in the corresponding period last year, supported by stronger exports and higher remittances.The May data follows a stronger January-March quarter of FY26, when India reported an unexpected surplus in both its current account and overall balance of payments, aided by robust services exports, higher remittances and foreign exchange swap operations by the RBI.India’s external balances have remained under pressure in 2026 as elevated crude oil prices following the Iran conflict widened the import bill while persistent capital outflows weighed on the rupee.Although an interim ceasefire in West Asia and policy measures aimed at boosting dollar inflows have led analysts to expect a broadly neutral or modestly surplus balance of payments for FY27, renewed geopolitical tensions and their impact on oil prices remain key risks for India’s external sector in the near term.
Source link
