QuantEco Research | Q2 FY26 BoP - Signs of uneasiness
Download ReportQuantEco Research | Q2 FY26 BoP - Signs of uneasiness
India registered a Net BoP (balance of payments) deficit of -1.1% of GDP (USD 10.9 bn) in Q2 FY26, in contrast to a surplus of 2.0% (USD 18.6 bn) in Q2 FY25. Notwithstanding the annualized narrowing of the current account deficit to 1.3% of GDP, the generation of a meagre surplus of 0.1% of GDP, under the capital account, weighed upon the Net BoP situation. Continued expansion in services exports, along with a front-loading of merchandise exports and remittances, provided a buffer to the current account. However, this got offset by weakness in overall capital flows, which look vulnerable amidst heightened geoeconomic and geopolitical uncertainties. The forecast for FY26 is based on two scenarios. Announcement of the India-US trade deal, along with the removal of the penalty tariff by Dec-25 could lead to a current account deficit at 1.3% of GDP (up from 0.8% projected earlier), accompanied by a BoP deficit of USD 14 bn. However, if the trade negotiations get stretched beyond Mar-26, then the FY26 current account deficit could widen to 1.5% of GDP, accompanied by a deeper BoP deficit of USD 30 bn.