India: A More Favourable Balance of Payments Outlook

India's external balance of payments has shown surprising resilience, with a Q1 CY26 surplus driven by strong remittance inflows and reduced oil import dependency. Policy measures from the RBI to attract dollar inflows are expected to maintain this positive trend.

Key Takeaways

• 1.India recorded a $7.2bn balance of payments surplus in Q1 CY26 despite softer capital inflows, driven by strong remittances and lower-than-expected oil imports.
• 2.India's oil intensity has declined, making the current account deficit less vulnerable to high oil prices than in previous energy shock cycles.
• 3.The RBI has introduced measures to incentivize dollar inflows, including FCNR(B) deposits and concessional forex swaps for quasi-sovereigns, expected to generate ~$60bn.

Table of Contents

• India: A More Favourable Balance of Payments Outlook
• Reassessing the balance of payments outlook
• Lower oil intensity may help mitigate the impact of higher oil prices
• Gold import duties likely to curb gold imports
• Reassessing India's current account balance
• Revisiting our capital flow assumptions
• Why have foreign equity flows remained subdued in recent years?
• FX view
• Appendix

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