India’s current account deficit widened sharply in the July–September quarter after US President Donald Trump’s 50% tariff on Indian goods weakened export performance. The deficit rose to $12.3 billion, or 1.3% of GDP, according to data released Monday by the Reserve Bank of India. Despite the deterioration, the gap remained narrower than the $15.4 billion predicted in a Bloomberg survey, thanks to resilient remittances and a strong services surplus. In the previous quarter, the shortfall had been just $2.7 billion.
A surge in global gold prices inflated India’s import bill, while exports continued to struggle under the weight of the punitive tariff—measures partly tied to India’s ongoing purchases of discounted Russian oil. The widening deficit added pressure on the rupee, which hit a record low of 89.64 per US dollar on Monday, deepening concerns about external stability.
Economists warn the picture may worsen. Aditi Nayar, chief economist at ICRA, said the sharp rise in gold imports in October is likely to push the current account deficit above 2.5% of GDP for the ongoing quarter, potentially extending pressure on the currency and trade flows.
RBI data showed the merchandise trade gap narrowed slightly to $87.4 billion from $88.5 billion a year earlier, though overall goods exports remained under strain. Services exports, however, climbed to $50.9 billion from $44.5 billion, powered largely by gains in computer services. Remittances also strengthened, rising to $38.2 billion from $34.4 billion a year earlier, reflecting continued inflows from Indians employed overseas.
Foreign investment trends were mixed. Net foreign direct investment recorded an inflow of $2.9 billion, reversing a $2.8 billion outflow in the same quarter last year. But foreign portfolio investment swung to a net outflow of $5.7 billion, compared with a substantial $19.9 billion inflow a year earlier, signaling a more cautious stance from global investors as India navigates a more volatile external environment.
