India's balance of payments deficit extends in May as portfolio outflows persist

MUMBAI: India’s balance of payments (BoP) remained in a deficit for the second consecutive month in May, as capital outflows added to the pressure of a current account deficit, central bank data showed on Wednesday.

The deficit, however, narrowed compared to April when India reported a BoP deficit of $6.6 billion.

India’s overall balance of payments recorded a deficit of $4.4 billion in May this year compared with a surplus of $4.4 billion in the year-ago period.

Current account balance stood at a deficit of $2 billion for the month compared with a surplus of $700 million in May 2025.

Net transfers, which include remittances from Indian workers overseas, rose to $13.6 billion from $10.5 billion a year ago.

The capital account, which includes foreign portfolio investments, saw an outflow of $2.4 billion in May 2026 compared with an inflow of $3.7 billion in the same month last year.

India’s June merchandise trade deficit widens to $30.43bn

India reported a surprise surplus in current account and overall balance of payments for the January-March quarter of fiscal 2026 on strong earnings from the services sector, an increase in worker remittances and forex swaps conducted by the central bank.

Worries over India’s balance of payments deficit have been a crucial pain point for the rupee in 2026, as the Iran war lifted oil prices sharply and caused unabated capital outflows.

While an interim ceasefire and policy measures to boost dollar inflows have prompted analysts to forecast a near neutral or modestly surplus BoP for the fiscal year ending March 2027, the most recent flare-up in the Middle East and its impact on oil prices will be in focus in the near term.