India's July-September (Q2 FY26) current account deficit narrowed to $12.3 billion or 1.3% of GDP, reflecting easing pressure from a high merchandise trade deficit of $87.4 billion. The moderation signals resilience amid global economic uncertainties and sustained domestic demand in the economy's external sector.
India reported a merchandise trade deficit of $87.4 billion for the July-September quarter of 2025, a significant figure shaped by imports surpassing exports. Despite this, the current account deficit (CAD) narrowed to $12.3 billion, equivalent to 1.3% of GDP, signaling a moderation compared to earlier quarters. This tightening was driven primarily by sustained growth in services exports and strong remittance inflows, which helped contain the overall external imbalance.
The Reserve Bank of India and economic analysts note that while the merchandise trade gap remains wide due to elevated import volumes—especially of gold, electronics, and fertilizers—the broader current account position is improving amidst robust services earnings and capital flows. The CAD at 1.3% of GDP remains within manageable levels, reflecting India's growing economic resilience despite global trade headwinds and tariff challenges.
Key Highlights
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Merchandise trade deficit stood at $87.4 billion during July-September 2025.
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Current account deficit narrowed to $12.3 billion in Q2 FY26, down from earlier quarters.
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CAD equivalent to 1.3% of GDP, showing moderation and economic stability.
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Services exports growth and remittances critical in offsetting merchandise deficit pressures.
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Imports remain elevated due to demand for gold, electronics, and fertilizers, widening trade gap.
Sources: Reuters, Economic Times, Reserve Bank of India, Ministry of Commerce and Industry