New Delhi: India recorded a current account surplus of USD 13.5 billion (1.3% of GDP) in the January-March quarter (Q4) of 2024-25, according to data released by the Reserve Bank of India (RBI) on Friday. This marks a sharp improvement from a USD 4.6 billion surplus (0.5% of GDP) in the same quarter last year, and a deficit of USD 11.3 billion in the previous quarter (Q3 2024-25).
The surplus was mainly driven by higher services exports and strong remittance inflows from overseas Indians.
Key Highlights:
Services boost:
Net services receipts rose to USD 53.3 billion in Q4, up from USD 42.7 billion a year ago. Key drivers were business and computer services.
Remittances rise:
Personal transfer receipts, mostly remittances, increased to USD 33.9 billion, compared to USD 31.3 billion last year.
Moderation in income outflow:
Payments on the primary income account, largely investment returns paid abroad, reduced to USD 11.9 billion from USD 14.8 billion.
Trade deficit still high:
The merchandise trade deficit stood at USD 59.5 billion, higher than USD 52 billion in Q4 last year, but better than USD 79.3 billion in the previous quarter.
Foreign investment weak:
Net FDI inflow was only USD 400 million in Q4, much lower than USD 2.3 billion a year ago.
FPI saw a net outflow of USD 5.9 billion, compared to a strong USD 11.4 billion inflow last year.
Forex reserves gain:
There was an accretion of USD 8.8 billion to the forex reserves on a BoP basis, down from USD 30.8 billion in Q4 of 2023-24.
Annual Picture: FY 2024-25
Despite the strong Q4, India ended 2024-25 with a current account deficit (CAD) of USD 23.3 billion, or 0.6% of GDP. This was slightly lower than USD 26 billion (0.7% of GDP) in 2023-24.
Annual FDI inflows fell sharply to USD 1 billion, down from USD 10.2 billion.
FPI net inflows for the year also dropped to USD 3.6 billion, compared to USD 44.1 billion in 2023-24.
Expert View
Aditi Nayar, Chief Economist at ICRA, said the Q4 surplus was expected but the size of the surplus was a surprise, mainly due to a dip in income outflows.
However, she warned that the current account could return to a deficit in Q1 of 2025-26, as trade deficits widen and services surplus moderates.
The strong Q4 performance provides short-term relief, but weak investment inflows and a rising trade gap remain key concerns for India’s external finances going forward.
