CAD Widens to $13.2 bn in Q3 on Higher Trade Deficit: RBI

India's current account deficit (CAD) rose to USD 13.2 billion, or 1.3 per cent of GDP, in the December quarter from USD 11.3 billion in the year-ago period, mainly due to a higher trade deficit caused by a decline in exports to the US, according to RBI data released on Monday.

However, the current account deficit moderated to USD 30.1 billion (1 per cent of GDP) in April-December 2025, from USD 36.6 billion (1.3 per cent of GDP) in the same period a year ago.

"India's current account deficit increased to USD 13.2 billion (1.3 per cent of GDP) in Q3:2025-26 from USD 11.3 billion (1.1 per cent of GDP) in Q3:2024-25," the RBI's data on Developments in India's Balance of Payments said.

Merchandise trade deficit at USD 93.6 billion in the quarter was higher than USD 79.3 billion in the same period a year ago.

Net services receipts increased to USD 57.5 billion during the period from USD 51.2 billion a year ago, the Reserve Bank of India (RBI) said.

Services exports have risen on an annual basis in major categories such as computer services and other business services.

It further said that net outgo on the primary income account, mainly reflecting payments of investment income, decreased to USD 12.2 billion from USD 16.4 billion in the third quarter of the previous financial year.

Personal transfer receipts under the secondary income account, mainly representing remittances by Indians employed overseas, rose to USD 36.9 billion from USD 35.1 billion in the December quarter a year ago.

As regards foreign direct investment (FDI), it said, there was a net outflow of USD 3.7 billion, higher than a net outflow of USD 2.8 billion in the third quarter of the previous fiscal.

At the same time, Foreign portfolio investment (FPI) recorded a net outflow of USD 0.2 billion as against net outflow of USD 11.4 billion in Q3 of 2024-25.

However, Non-resident deposits (NRI deposits) recorded a net inflow of USD 5.1 billion, higher than USD 3.1 billion mobilised in the third quarter of 2024-25.

Net inflows under external commercial borrowings (ECBs) to India amounted to USD 3.3 billion, lower than a net inflow of USD 4.4 billion in the third quarter of 2024-25.

Foreign exchange reserves depleted by USD 24.4 billion (on a BoP basis) in comparison to a depletion of USD 37.7 billion in the same period a year ago.

For the nine months ending December 2025, net FDI inflows increased to USD 3.0 billion from USD 0.6 billion in April-December 2024.

However, FPI recorded net outflows of USD 4.3 billion as against net inflows of USD 9.4 billion a year ago.

In April-December 2025, foreign exchange reserves depleted by USD 30.8 billion (on a BoP basis) as compared to a depletion of USD 13.8 billion a year ago.

Looking ahead, ICRA Chief Economist Aditi Nayar said, the unusually higher-than-expected merchandise trade deficit (MTD) for January 2026 is likely to limit the seasonal improvement in the current account balance in Q4 FY2026, unless the prints for February and March 2026 cool significantly.

Additionally, she said, the recent surge in international crude oil prices, following the escalation of conflict in West Asia, is also likely to have some bearing on the import bill in the immediate term.

"We currently expect the current account balance to print between -USD 1.0 billion and +USD 1 billion in Q4 FY2026. We estimate India's current account deficit to print at around 0.6-0.7 per cent of GDP in FY2026, and rise thereafter to around 1 per cent of GDP in FY2027, albeit with risks tilted to the upside," she said.