India's current account deficit moderates to $12.3 billion in September quarter

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India's current account deficit moderated in the July-to-September quarter on the back of a lower merchandise trade deficit, the Reserve Bank of India said on Monday.

The current account deficit  stood at $12.3 billion, or 1.3% of GDP, in the second quarter of the fiscal year 2025-26, compared with an upwardly revised deficit of $20.8 billion, or 2.2% of GDP, in the same quarter a year ago.

In the preceding quarter, the current account had recorded a deficit of $2.4 billion, or 0.2% of GDP.

India's merchandise trade deficit (INTRDQ=ECI) narrowed to $87.4 billion from $88.5 billion a year earlier, the RBI said.

"The current account deficit in Q2 moderated ... driven by frontloading of goods exports to the U.S. and continued healthy momentum in services exports," said Sakshi Gupta, principal economist at HDFC Bank.

India's net services receipts rose to $50.9 billion in the quarter from $44.5 billion a year earlier, data showed.

"Services exports have risen on a year-on-year basis in major categories such as computer services and other business services," the RBI said.

Private transfer receipts, which are mainly remittances by Indians employed overseas, increased to $38.2 billion in the quarter from an upwardly revised $34.4 billion a year earlier.

India's balance of payments recorded a deficit of $10.9 billion, compared with a surplus of $18.6 billion a year earlier.

HDFC's Gupta said that going forward, services could support the current account but the impact of tariffs on goods exports could add greater pressure as the "frontloading effect" fades.

"For the full year, we expect CAD to GDP close to 1.1% while the balance of payments to remain in deficit," she said.