India's balance of payments is projected to register a $60–65 billion surplus in FY27 despite the current account deficit widening to 1.1–1.3% of GDP, HDFC Bank reported. Over $136 billion in special central bank swap and FCNR(B) inflows are countering elevated crude import bills and soft portfolio flows.
India Balance of Payments Projected at $60-65B Surplus in FY27
Strong capital mobilization under central bank swap windows offsets a widening trade gap and rising crude import bills.
NEW DELHI — India’s balance of payments is projected to achieve an overall surplus of $60 billion to $65 billion in fiscal year 2026–27 (FY27), even as the current account deficit widens to between 1.1% and 1.3% of gross domestic product, according to an economic research report released by HDFC Bank on Friday. The projected surplus highlights how extraordinary foreign exchange inflows mobilized through the Reserve Bank of India’s special deposit schemes and external borrowing facilities are offsetting soft institutional portfolio flows and an expanding goods trade deficit.
The forecast provides key macroeconomic clarity for international investors, domestic businesses, and currency markets, demonstrating that the external sector remains insulated by foreign currency reserves despite global energy volatility and geopolitical instability in West Asia.
Special Central Bank Inflows Offset Q1 Outflows
The projected full-year turnaround follows a challenging opening quarter for the external account. In the first quarter of FY27 (April–June 2026), India’s balance of payments recorded a deficit of $8.1 billion, reversing from a surplus of $4.5 billion registered in the corresponding period of the previous year. The capital account slipped into a deficit of $5.5 billion during the quarter as foreign portfolio investors (FPIs) pulled out $9.6 billion from domestic debt and equity markets amid elevated global sovereign yields.
According to HDFC Bank, this early-year capital drag is being reversed by the central bank's foreign currency intervention framework. Data released by the Reserve Bank of India indicates that as of August 31, 2026, cumulative inflows under the central bank's special USD-INR swap facility reached $136.38 billion. The inflows comprise:
FCNR(B) Deposits: $127.23 billion garnered via Foreign Currency Non-Resident (Bank) deposit mobilizations.
Overseas Foreign Currency Borrowings: $5.26 billion mobilized by commercial lenders.
Other Credit Windows: An additional $3.89 billion channeled through external commercial borrowing paths.
These capital injections provide a financial buffer that will cover the current account gap and replenish national foreign currency reserves.
Trade Deficit and Current Account Projections
While the capital account is set for a substantial surplus, the current account continues to face pressure from rising merchandise trade deficits.
HDFC Bank projects the current account deficit (CAD) to settle between 1.1% and 1.3% of GDP for the full financial year, with the gap expanding to 1.5% to 1.7% of GDP in the July–September second quarter. In the first quarter, the CAD was held at $4.2 billion (0.5% of GDP), compared with $3.4 billion (0.4% of GDP) in the prior-year period.
The widening gap is largely driven by physical goods imports. The merchandise trade deficit widened to $86.1 billion in the first quarter from $68.9 billion a year earlier, with total imports climbing 20% to $218 billion. Higher landed costs for crude petroleum and precious metals contributed to the increased import bill.
However, services trade and worker remittances continue to counter the physical goods shortfall. Net services exports expanded 7.8% year-on-year to $52 billion, while net secondary transfer receipts—primarily remittances from the Indian diaspora overseas—surged by $10 billion to reach $41 billion during the quarter.
Impact on Currency, Consumers, and Borrowers
The projected surplus carries clear practical implications across trade and economic sectors:
Currency Stability: HDFC Bank forecasts mild depreciation for the Indian rupee, projecting the USD/INR exchange rate to navigate the 95–97 band by late December 2026 due to strong global bond yields and Middle East conflict risk.
Importers and Exporters: Elevated merchandise trade gaps will keep freight and energy hedges in focus, though services exporters will continue to benefit from strong software, consulting, and global capability center (GCC) billings.
Domestic Liquidity: A balance of payments surplus expanding by over $60 billion strengthens systemic liquidity, giving domestic lenders the capacity to expand credit delivery without relying on aggressive domestic deposit rate hikes.
Official Sources Section
The macroeconomic forecasts, balance of payments numbers, and regulatory data cited in this report are grounded in official economic registries:
Quote Section
In its comprehensive external sector research report released on Friday, HDFC Bank's economic research division stated:
"The large inflows mobilised under the RBI's FCNR(B) deposit and overseas borrowing measures are likely to more than compensate for the weak capital flows recorded in Q1 and support an overall BoP surplus in FY27. While the current account deficit will widen to around 1.1-1.3 per cent of GDP due to elevated merchandise import bills and crude costs, the overall external position remains resilient, maintaining an upside bias to our BoP surplus forecast."
Treasury analysts tracking foreign exchange markets added:
"The front-loaded capital receipts through special central bank swap facilities ensure that sovereign foreign exchange buffers remain well-shielded, ensuring the economy absorbs trade imbalances without acute external-financing stress."
Why It Matters
A balance of payments surplus of $60 billion to $65 billion confirms that India’s external financing architecture can withstand global economic headwinds. Even as imported crude oil bills and geopolitical uncertainty widen the goods trade gap, policy-driven non-resident deposits and sustained remittance inflows protect import cover. For international rating agencies and institutional investors, a healthy balance of payments surplus reinforces India's sovereign credit metrics and preserves domestic monetary autonomy.
Key Facts at a Glance
Projected FY27 BoP Surplus: $60 billion to $65 billion, according to HDFC Bank.
Current Account Deficit Forecast: Expected at 1.1% to 1.3% of GDP for FY27 (1.5%–1.7% in Q2).
Central Bank Swap Inflows: Reached $136.38 billion as of August 31, 2026, led by $127.23 billion in FCNR(B) deposits.
Merchandise Trade Deficit: Reached $86.1 billion in Q1 FY27, partially offset by $52 billion in net services receipts and $41 billion in remittances.
Exchange Rate Trajectory: USD/INR projected in the 95–97 band by December 2026.
Frequently Asked Questions
What is HDFC Bank's balance of payments surplus forecast for India in FY27?
HDFC Bank projects India's balance of payments to record a surplus of $60 billion to $65 billion for the 2026–27 fiscal year.
Why will the balance of payments remain in surplus despite a wider CAD?
The surplus is driven by substantial capital inflows mobilised via the Reserve Bank of India's special USD-INR swap facility, including over $127 billion in FCNR(B) deposits, which comfortably offsets the goods trade gap.
What is the projected Current Account Deficit for FY27?
The current account deficit is projected to settle between 1.1% and 1.3% of GDP across FY27, with the second quarter anticipated at 1.5% to 1.7% of GDP.
What factors are widening India's merchandise trade deficit?
Higher import prices for crude petroleum (assumed at an average of $85 per barrel) and precious metals drove a 20% year-on-year increase in merchandise imports during the first quarter.
Source: Macroeconomic projections from HDFC Bank, balance of payments data from the Reserve Bank of India, and trade statistics from the Ministry of Commerce and Industry.
