India's current account deficit (CAD) widened to 13.2 billion US dollars, or 1.3 per cent of Gross Domestic Product (GDP), in the third quarter of the financial year 2025-26, that is the October-December 2025 quarter. This marks an increase from the deficit of 11.3 billion US dollars recorded in the corresponding quarter of the previous year. The current account records a country's transactions with the rest of the world in goods, services, primary income, and secondary income such as remittances. A current account deficit arises when the value of imports of goods, services, and transfers exceeds the value of exports. The main reason for the wider deficit was a larger goods trade gap. The goods account deficit widened to 93.6 billion US dollars from 79.3 billion US dollars a year earlier, driven by a surge in imports. Pressure from the United States government had prompted Indian refiners to limit their purchases of cheaper Russian crude oil and switch to costlier alternative sources, raising the import bill. On the positive side, the services surplus rose to 57.5 billion US dollars from 51.2 billion US dollars, supported by strong exports of software and business services. A moderate current account deficit is generally considered manageable for a fast-growing economy, as it can reflect strong investment demand. However, a persistently wide deficit can pressure the rupee and foreign exchange reserves, making it an important indicator monitored by the Reserve Bank of India and policymakers.
India Current Account Deficit Widens to 13.2 Billion US Dollars or 1.3 Per Cent of GDP in the December 2025 Quarter Driven by a Larger Goods Trade Gap Even as the Services Surplus Expands
India's current account deficit widened to 13.2 billion US dollars or 1.3 per cent of GDP in the October-December 2025 quarter, up from 11.3 billion US dollars a year earlier, mainly due to a larger goods trade gap even as the services surplus expanded.
Key facts
- India's current account deficit widened to 13.2 billion US dollars, or 1.3 per cent of GDP, in the October-December 2025 quarter.
- This was up from a deficit of 11.3 billion US dollars in the corresponding quarter of the previous year.
- The goods account deficit widened to 93.6 billion US dollars from 79.3 billion US dollars a year earlier.
- Indian refiners limited purchases of cheaper Russian crude and switched to costlier sources, raising the import bill.
- The services surplus rose to 57.5 billion US dollars from 51.2 billion US dollars.
- The current account records a country's transactions with the rest of the world in goods, services, and income.
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Consider the following statements regarding India's current account deficit in the October-December 2025 quarter:\n1. The current account deficit widened to 1.3 per cent of GDP, higher than the deficit in the same quarter of the previous year.\n2. The widening of the deficit was driven mainly by a larger goods trade gap.\nWhich of the statements given above is/are correct?
India's current account deficit widened to 13.2 billion US dollars, or 1.3 per cent of GDP, in the October-December 2025 quarter, up from 11.3 billion US dollars in the corresponding quarter of the previous year, so statement 1 is correct. The widening was driven mainly by a larger goods trade gap, as the goods account deficit rose to 93.6 billion US dollars from 79.3 billion US dollars, so statement 2 is also correct. Hence both statements are correct.
Source: Reuters / Investing.com
Frequently asked questions
What is the current account deficit?
The current account deficit arises when the value of a country's imports of goods, services, and transfers exceeds the value of its exports in transactions with the rest of the world.
What was India's current account deficit in the October-December 2025 quarter?
India's current account deficit widened to 13.2 billion US dollars, or 1.3 per cent of GDP, in the October-December 2025 quarter, up from 11.3 billion US dollars a year earlier.
Why did the current account deficit widen?
The deficit widened mainly because of a larger goods trade gap, as the goods account deficit rose to 93.6 billion US dollars due to a surge in imports, partly because Indian refiners switched from cheaper Russian crude to costlier alternatives.
How did the services account perform?
The services surplus rose to 57.5 billion US dollars from 51.2 billion US dollars, supported by strong exports of software and business services.
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