India’s Current Account Deficit Narrows to $5.2 Billion in August 2026: RBI Data

India’s current account deficit (CAD) declined to the $5.2 billion in the month of August 2026 compared to $6.1 billion in August 2025, as per figures released by the Reserve Bank of India (RBI). However, robust capital flows helped the overall balance of payments to reach a surplus of $45.4 billion. Nonetheless, the cumulative current account deficit increased during April-August 2026–27 on account of pressure from merchandise trade deficit.

What Is the Current Account Deficit (CAD)?

Current account is one of the components of the balance of payments (BoP) of a country. This shows the transactions between residents of a country and non-residents concerning goods, services, primary income, and secondary income.

Current account deficit refers to the situation where payments for such transactions exceeded receipts during a particular period. For India, a major reason for current account deficit is merchandise trade deficit; whereas exports of services and remittances make up for the difference.

The RBI’s provisional data reveals that the current account deficit in India has declined in August 2026, but increased in the first five months of FY2026–27.

India’s Current Account: August 2026 Data

Indicator	August 2025	August 2026
Current account balance	-$6.1 billion	-$5.2 billion
Merchandise trade deficit	$27.6 billion	$26.6 billion
Merchandise exports	$35.1 billion	$44.7 billion
Merchandise imports	$62.7 billion	$71.3 billion
Net services receipts	$15.6 billion	$16.5 billion
Net transfers	$12.2 billion	$12.8 billion
Net income account balance	-$6.3 billion	-$8.0 billion
Overall balance of payments	-$5.6 billion	+$45.4 billion

Why Has India’s Current Account Deficit Declined in August?

1. Smaller Deficit in Merchandise Trade

Merchandise trade deficit in India fell to $26.6 billion in August 2026 from $27.6 billion in August 2025. The merchandise exports were at $35.1 billion last year compared with $44.7 billion this year, while the merchandise imports increased from $62.7 billion to $71.3 billion.

The growth in merchandise exports was higher than the growth in merchandise imports as per reported figures.

2. Higher Net Services Receipts

India’s net services receipts increased to $16.5 billion from $15.6 billion in the same month of the previous year. The services exports increased to $35.5 billion compared with $31.2 billion, while the services imports increased to $18.9 billion from $15.6 billion.

India’s services export, including activities like information technology, business and professional services helps in earning foreign-exchange and offsetting part of merchandise trade deficit.

3. Higher Remittance-related Transfers

Net transfers including remittances from Indians abroad increased to $12.8 billion in August 2026 from $12.2 billion in August 2025.

They positively contributed to the current account through inflows of money from overseas, although their contributions were partially reduced due to an increase in income account deficit from $6.3 billion to $8 billion.

Current Account Deficit Grew in April-August FY2026-27

While there was an improvement in the month of August, the overall CAD for India grew to $18.3 billion in April-August 2026-27 against $12.8 billion in April-August of last fiscal year.

Merchandise trade deficit grew to $146 billion against $124.7 billion while net services balance grew to $85.8 billion against $79.9 billion while net transfers grew to $66.8 billion against $55.6 billion.

It is evident from the figures above that better service and transfer receipts cushioned the impact of larger merchandise trade deficit but failed to stop growth in the overall CAD.

What Are External Commercial Borrowings (ECB)?

The external commercial borrowings are loans made by the Indian borrower from the foreign lender recognised by the regulatory body.

During the month of August 2026, the net external commercial borrowings made were a net outflow of $22.4 billion against a net outflow of $0.1 billion in the month of August 2025.

Net external commercial borrowings made by the Indian borrower were at $23.9 billion while the net external commercial borrowings to India stood at $1.6 billion.

Net ECBs for April-August 2026-27 showed a net outflow of $28.3 billion against a net inflow of $6.7 billion during the same period of the previous year.