Key Takeaways
- India’s balance of payments surplus reached $20.8 billion in July.
- Surge in foreign-exchange inflows drove the increase.
- Current account deficit narrowed to $7 billion from $3.2 billion a year ago.
India’s balance of payments recorded a surplus of $20.8 billion in July, marking a significant improvement from the $0.3 billion surplus recorded in the same period last year. This substantial increase was attributed to a surge in foreign-exchange inflows, following the central bank’s measures to attract overseas deposits.
The current account balance for July 2026 stood at a deficit of $7 billion, a marked improvement from the $3.2 billion deficit in July 2025. Net transfers, which include remittances from Indian workers overseas, rose to $13.2 billion in July from $12.6 billion a year ago.
The capital account, which includes foreign portfolio investments, recorded an inflow of $27.7 billion in July, compared with an inflow of $3.5 billion in the same period last year. These inflows were part of broader policy measures unveiled in June to boost dollar inflows, including discounted hedging for overseas borrowings by state-run firms and banks and free hedging for banks to raise overseas foreign-exchange deposits.
The Reserve Bank of India received $136.4 billion under the schemes between June 5 and August 31, with a much higher-than-expected $127 billion from non-resident deposits. This influx of funds has been crucial in addressing concerns over India’s balance of payments deficit, which has been a significant pain point for the rupee in 2026, exacerbated by the Iran war and its impact on crude oil prices.
Analysts are now forecasting a near-neutral or modest surplus in the balance of payments for the fiscal year ending March 2027, buoyed by these measures. However, worries over the balance of payments deficit have continued to affect the rupee, with capital outflows remaining a concern despite the recent improvements.
The central bank’s measures have been seen as a strategic response to the challenges posed by the global economic environment, particularly the impact of rising crude oil prices and capital outflows. These steps are aimed at stabilizing the balance of payments and supporting the rupee’s value in the face of external pressures.
