According to Reserve Bank of India, India’s current account  surplus recorded $13,5 billion in fourth quarter (Q4) of fiscal year (FY)2025. In this article we will see what the preliminary data of Balance of Payments shows for Q4 and for the FY25.

Balance of Payments (BoP) in Q4: 2024-25 (i.e. FY25)

The preliminary data on India’s balance of payments for the fourth quarter (Q4) of January-March 2024-25 show that the current account balance recorded a surplus of $ 13.5 billion, higher than the previous year.

A current account surplus is reported for the first time in four quarters. A current account deficit of $ 11.3 billion, representing 1.1% of Gross Domestic Product (GDP), was recorded in the third quarter (October – December) of 2024-25.

The merchandise trade deficit increased to $ 59.5 billion in Q4:2024-25, higher than $ 52.0 billion in Q4:2023-24.

Net Services trade increased to increased to $ 53.3 billion in Q4:2024-25 from $ 42.7 billion a year ago.

Services receipts also increased significantly. This mainly due to higher services exports like business services and computer services.

The primary income account moderated moderated from $ 14.8 billion to $ 11.9 billion in Q4:2024-25 in Q4:2023-24; while personal transfer receipts increased from  $ 31.3 billion in Q4:2023-24 to $ 33.9 billion in Q4:2024-25.

In the financial account, foreign direct investment witnessed a net inflow of $ 0.4 billion in Q4:2024-25 as compared to an inflow of $ 2.3 billion in the corresponding period of 2023-24.

The Foreign Portfolio Investment (FPI) witnessed a net outflow of $ 5.9 billion in Q4:2024-25, a significant decrease from the net inflow of $ 11.4 billion in the previous year.

External Commercial Borrowings (ECBs) to India increased to $ 7.4 billion from $ 2.6 billion, while Non-Resident Deposits (NRI deposits) saw a lower net inflow of $ 2.8 billion compared to $ 5.4 billion in the previous year.

The foreign exchange reserves had an accretion of $ 8.8 billion in Q4:2024-25, a decrease from $ 30.8 billion in Q4:2023-24.

Balance of Payments in 2024-25

India’s current account deficit for the fiscal year 2024-25 decreased to $23.3 billion (0.6% of GDP) from $26.0 billion (0.7% of GDP) in 2023-24, mainly due to higher net invisibles receipts.

The country experienced a current account surplus in the final quarter of the fiscal year, resulting in a reduction of the deficit to 0.6% of GDP from 0.7% in the previous year, driven by a decrease in primary income outflows.

The Reserve Bank of India (RBI) noted that net invisibles receipts were higher in 2024-25 compared to the previous year, particularly driven by services and personal transfers.

Conclusion

In conclusion, this marks the first time in the fourth quarter that the Current Account has seen a surplus. The last time the Current Account was in surplus was in Q1 of FY22 (0.9% see the graph above). The present surplus is attributed to a narrowing of the merchandise trade deficit compared to the previous year, as well as higher services exports such as business services and computer services, which contributed to a narrower net services trade. It will be interesting to see/analyze the final data of the Balance of Payments for FY 25 once it is released.

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