Key facts
- India reported a $4.7 billion current account surplus in April.
- This is a significant turnaround from a $4.8 billion deficit in April of the previous year.
- Inward remittances and a surplus in the services sector contributed to the surplus.
- Foreign portfolio investors withdrew $8.7 billion from Indian markets.
- Foreign direct investment increased to $7.4 billion.
India reported a $4.7 billion current account surplus in April, a significant turnaround from the $4.8 billion deficit recorded in the same month last year. This positive shift was primarily driven by higher inward remittance flows and a surplus in the services sector.
The net transfer, which includes remittances, foreign aid, pensions, and gifts, stood at $16 billion in the first month of the fiscal year, compared to $9.4 billion in the prior year. The services sector surplus was $18.6 billion, up from $15.9 billion in April of the previous year.
However, India's capital account turned deficit at $11.3 billion in April. This was due to foreign portfolio investors (FPIs) withdrawing $8.7 billion from Indian markets amid geopolitical conflicts, a reversal from the $5.3 billion surplus recorded in the same month last year when FPIs had withdrawn $2.1 billion.
Despite the FPI outflows, foreign direct investment (FDI) rose to a net $7.4 billion, compared to $1.6 billion a year prior. The net merchandise deficit widened slightly to $27.9 billion from $27.1 billion previously. Madan Sabnavis, Chief Economist at Bank of Baroda, noted that exporters have adjusted to the global economic order, but higher crude prices kept the merchandise deficit elevated.