Q4FY25 has Current Account Surplus as FY25 CAD at 0.6% of GDP

Q4FY25 REPORTS $13.5 BILLION CURRENT ACCOUNT SURPLUS

Q4FY25 was almost a repeat of Q4FY24, with the Indian economy reporting a surplus on the current account. The only difference was that the surplus is much larger in Q4FY25 at $13.5 Billion, compared to $4.6 Billion in Q4FY24. It was a combination of 3 factors viz. lower merchandise imports, higher services exports, and higher remittances from NRIs. Here is a summary of CAD / CAS of last 13 rolling quarters.

Data Source: DGFT / RBI (Previous figures revised where applicable)

It is not just that Q4 reported a surplus on the current account. Even the current account deficit for the third quarter ended December 2024 was revised lower from $(11.50) Billion to $(11.30) Billion. As a result, full year current account deficit for FY25 stood at a mere $23.3 Billion, or 0.6% of GDP. This is not only lower than the $26.0 Billion current account deficit for FY24, but also 10 bps lower as a percentage of GDP. That should give a lot of comfort to the Indian rupee and also the sovereign ratings, in a tough year.

HOW CAD BASKET SHAPED UP IN MARCH 2025 QUARTER?

Here is the break-up of the current account for the March 2025 quarter (Q4FY25) and how it compares with Q4FY24.

Data Source: RBI

Here are quick thoughts on CAD basket for Q4FY25.

• March 2025 quarter merchandise trade deficit at $(59.50) Billion is much lower than Q3 due to a shrinkage in imports. However, the exports were flat and did not fall in tandem. The Current Account also benefited from a sharp fall in the price of crude oil amid demand concerns. Even the interest outflow was sharply lower yoy.
• On the positive side, the Q4FY25 services trade surplus at $53.30 Billion was 24.8% higher than the $42.70 Billion in Q4 last year. Even the secondary income, representing remittances from abroad, is higher by 9.8% yoy at $31.50 Billion.

Like in Q4FY24, the current account reported a surplus in Q4FY25 too. It was like a 4-point boost. Merchandise imports were lower, services exports were higher, interest payouts were lower, and inward remittances were higher.

CAD UPDATE FOR FINANCIAL YEAR FY25

Here is the break-up of current account deficit for FY25 and how it shifted yoy compared to the year-ago period FY24.

Data Source: RBI

For the second year in a row, the current account deficit (CAD) position has been fairly comfortable. For FY24, the CAD was at just 0.7% of GDP and for FY25 the current account deficit is still lower at 0.6% of GDP. That is much lower than what most economists had worried about. What is creditable is that this has been achieved in a tough year. India made the best of weak oil prices and strong NRI remittances during the year.

Of course, FY26 poses new challenges in the form of geopolitical unrest, impact on trading lines, supply chain bottlenecks, and the much-feared reciprocal tariff regime. For the Current Account, FY26 surely appears to be more challenging!