India's Current Account Deficit Projections

India's current account deficit (CAD) is projected to remain at a manageable 1% of GDP for fiscal 2025, slightly up from 0.7% in the previous year, according to a recent CRISIL report. This stability is attributed to strong financial inflows and a steady services trade surplus, despite geopolitical risks that require close monitoring.

Quarterly Performance Insights

In the second quarter of fiscal 2025, India's CAD stood at USD 11.2 billion, or 1.2% of GDP, showing a slight widening from the first quarter. The Reserve Bank of India highlighted a rising merchandise trade deficit but also noted the role of strong services exports and healthy remittances in keeping the CAD in check.

Financial Inflows and Forex Reserves

Financial inflows saw significant growth, with net FPI inflows surging to USD 19.9 billion. Despite a depreciation of the rupee to 83.8 per dollar, India's forex reserves experienced an accretion of USD 18.6 billion during the quarter, showcasing the country's resilience in managing external economic pressures.