India’s current account deficit (CAD) widened in the December quarter, reflecting a sharp expansion in the merchandise trade gap amid robust import growth and volatile global commodity prices.
According to data released by the Reserve Bank of India, the CAD increased during the third quarter of the financial year, primarily driven by a higher goods trade deficit. Rising crude oil imports and stronger domestic demand contributed significantly to the widening gap.
While services exports — particularly in IT and business services — continued to provide a cushion, they were insufficient to fully offset the surge in merchandise imports. Net services receipts and remittances remained resilient, helping contain the overall deficit to manageable levels.
Economists noted that the expansion in the current account shortfall reflects both cyclical and structural factors, including elevated energy prices and sustained capital goods imports linked to infrastructure and industrial expansion.
Despite the wider CAD, analysts indicated that India’s external position remains stable, supported by healthy foreign exchange reserves and steady capital inflows. However, continued pressure on the trade balance could keep the current account under strain in the coming quarters if global uncertainties persist.
The central bank is expected to closely monitor external sector developments, particularly trends in oil prices, export demand and capital flows, to ensure macroeconomic stability.