India’s current account posted a deficit of 0.2% of GDP in Q1 FY26

Current Context: On 1 September 2025, the Reserve Bank of India (RBI) reported India’s Current Account Deficit (CAD) at $2.4 billion, or 0.2% of GDP, for Q1 FY26 (April–June 2025).

• This contrasts with a $13.5 billion surplus (1.3% of GDP) in Q4 FY25 and improves over the $8.6 billion deficit (0.9%) in Q1 FY25.
• The deficit was driven by a merchandise trade gap of $68.5 billion, partially offset by services exports ($47.9 billion) and private transfers ($33.2 billion).
• Primary income outflows rose to $12.8 billion, reflecting higher investment income payments.
• Foreign Direct Investment (FDI) inflows stood at $5.7 billion, while Foreign Portfolio Investment (FPI) rose to $1.6 billion.
• Despite global headwinds, India’s external position remained stable, supported by robust invisibles and capital flows.

Question:

Q.1 According to the Reserve Bank of India (RBI) data released on 1 September 2025, what was India’s Current Account Deficit (CAD) in Q1 FY26 (April–June 2025)?
a) $13.5 billion surplus (1.3% of Gross Domestic Product – GDP)
b) $8.6 billion deficit (0.9% of GDP)
c) $2.4 billion deficit (0.2% of GDP)
d) $5.7 billion deficit (0.5% of GDP)

Answer: c) The Reserve Bank of India (RBI) reported CAD at $2.4 billion (0.2% of GDP) in Q1 FY26, compared with a $13.5 billion surplus in Q4 FY25 and an $8.6 billion deficit in Q1 FY25.