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Below the Quote on Current Account Deficit by Aditi Nayar, Chief Economist, ICRA Ltd

"India's current account deficit (CAD) rose slightly to $4.2 billion in Q1 FY2027 from $3.4 billion in the year ago quarter, with the material widening in the merchandise trade deficit owing to the surge in commodity prices being largely offset by the healthy expansion in net invisible earnings. With this, the CAD was contained at a comfortable 0.5% of GDP in the quarter, as against 0.4% in Q1 FY2026, in spite of the ongoing challenges posed by the West Asia crisis.

Nevertheless, the country witnessed capital outflows for the third consecutive quarter in Q1 FY2027, led by sustained FPI outflows, which led to a drawdown of reserves to the tune of $8.1 billion, despite the low CAD print.

Looking ahead, ICRA expects the CAD to widen in Q2 and Q3 FY2027, relative to the Q1 levels, which would push up the full-year print to ~0.9% of GDP, up from 0.7% in FY2026, while remaining quite manageable. This would be comfortably financed, aided by the sizeable FCNR(B) inflows, which should lead to an accretion to reserves in FY2027 after a gap of two years."

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