India's balance of payments moves towards current account deficit and capital outflows in May 2026
Preliminary data on India's balance of payments shows that in May 2026, the overall balance reached a deficit of $4.4 billion, compared to a surplus of $4.4 billion in the same month a year earlier. During this period, the current account moved to a deficit of $2.0 billion and the capital account turned into a net outflow of $2.4 billion, increasing pressure on the external sector.
Highlights
- India's trade deficit reached $27.9 billion in May 2026, with merchandise imports at $74.0 billion and exports at $46.1 billion.
- In May 2026, the capital account recorded a net deficit of $2.4 billion, and foreign portfolio investment turned into an outflow of $4.7 billion.
- The overall balance of payments for April-May 2026 came to a deficit of $11.0 billion, reflecting weak capital flows and external financing pressures.
This article was translated from the original. Read the original version by our correspondent here.
Key Trends in Balance of Payments for May 2026
According to the Reserve Bank of India's press release, the trade deficit widened to $27.9 billion in May 2026, with merchandise exports at $46.1 billion and imports at $74.0 billion. The net surplus from services remained nearly stable at $15.7 billion, but could not fully offset the large gap in goods trade.Net transfers rose to $13.6 billion, up from $10.5 billion a year earlier, while the net income component remained in deficit at $3.4 billion. In the cumulative period of April-May 2026, the current account posted a surplus of $2.8 billion, compared to a deficit of $4.1 billion in April-May 2025.
Capital Flows and Impact on the External Sector
In May 2026, the capital account recorded a net deficit of $2.4 billion, compared to a net surplus of $3.7 billion in May 2025. Foreign portfolio investment turned into a net outflow of $4.7 billion, and net foreign direct investment also saw a mild outflow of $0.1 billion, although gross net FDI inflows into India stood at $2.4 billion.Net external commercial borrowing was limited to $0.1 billion, while short-term loans provided net support of $3.2 billion to India. With the overall balance coming to a deficit of $4.4 billion, monetary movements showed an adjustment of $4.4 billion, and the total overall balance for April-May 2026 reached a deficit of $11.0 billion, highlighting weak capital flows and external financing pressures during this period.
Our previous report discussed India's merchandise trade deficit reaching a five-month high in June 2026 and the situation where import growth outpaced exports. It highlighted the estimate that the current account deficit could rise to 1.5% of GDP in Q1 FY2027 amid high commodity prices and the potential pressure on the external sector.
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