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Informist, Tuesday, Jun. 9, 2026

 

By Pratiksha

 

NEW DELHI – After recording two consecutive years of deficit, India's balance of payments may turn into surplus in 2026-27 (Apr-Mar) following the latest measures by the Reserve Bank of India and the government to spur foreign inflows, economists said.   

 

Before the announcement of the measures, in light of the large foreign outflows after the war in West Asia began in late February, economists had pegged a balance-of-payments deficit of about $50 billion-$75 billion in FY27. However, they now expect the balance of payments to turn into a surplus of around $10 billion-$20 billion in FY27. In FY25, there was depletion of $5 billion in foreign exchange reserves on a balance of payments basis. The depletion further widened to $23.6 billion in FY26.

 

"...recent measures by the RBI would lead to greater inflows, which would offset the shortfall in the current account. Thus, we can expect India's overall BoP to record a positive balance in FY27. This should offer some support to INR," Bank of Baroda said in a note.

 

RBI Governor Sanjay Malhotra Friday announced a host of foreign capital measures, which are expected to draw a total of around $60 billion-$75 billion of foreign inflows into India, as per analysts. Among the various measures, Malhotra announced a facility of concessional foreign exchange swap till Sept. 30 to incentivise external commercial borrowings by public sector undertakings. 

 

He also introduced a similar facility for bearing the full hedging cost to banks for raising fresh three-five year foreign currency non-resident deposits till Sept. 30. The central bank also expanded the universe of government securities under the Fully Accessible Route. Meanwhile, the government exempted foreign institutional investors from paying capital gains tax on investment in government bonds. It also exempted FIIs from paying any witholding tax on interest on such investments.

 

However, economists expect India's current account deficit to widen sharply to 1.2-2.2% of GDP in FY27 on the back of higher oil prices, lower merchandise exports, and moderation in remittances. Current account was in a deficit of $25.2 billion in FY26, slightly higher than $22.9 billion a year ago. As a share of GDP, the deficit remained unchanged in FY26 at 0.6%.

 

"We expect the CAD to widen to 2.2% of GDP this fiscal, up from 0.6% last fiscal. Costlier crude oil, natural gas and fertilisers will crank up India's import bill significantly this fiscal, while exports are heading for a decline due to global trade disruptions and weakening demand," economists at CRISL Ltd. said in a note. "Remittances from the Gulf (~38% of total) are also at risk because of the West Asia conflict. However, a healthy services trade surplus is expected to provide some offset." 

 

Given the largely manageable current account deficit and measures to attract foreign inflows, economists expect the Indian rupee to find some stability. The Indian currency has been under immense pressure, depreciating over 6% against the dollar so far this year, due to a surge in crude prices and strong foreign outflows.   

 

Bank of Baroda expects the rupee to trade with an appreciating bias in the short term with a range of 95-96 a dollar. However, over the medium term, worsening fundamentals and pressure on twin deficits could lead to renewed pressure on the currency, pushing it towards 96-98 a dollar, it added.

 

"In the near term, INR may benefit from these flows, but the extent will depend on (1) RBI FX intervention, (2) USD (US dollar) strength amid geopolitical uncertainties and likely Fed rate hikes and (3) the resumption of stable capital flows," economists at Kotak Mahindra Bank said. They expect the rupee to trade at 93-97 a dollar through most of FY27.  End

 

US$1 = INR 95.35

 

Edited by Avishek Dutta

 

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