India’s current account deficit widened to 1.3% of GDP in Q2 FY2026 from 0.3% of GDP in Q1, albeit lower than our forecast. The spike in gold imports and consequently MTD (to a record $41.7 billion) in October 2025 is likely to bloat the CAD to above 2.5% of GDP in Q3 FY2026. Overall, CAD/GDP is projected at a manageable 1.1-1.2% of GDP in FY2026.

• India’s current account deficit (CAD) widened on a quarter-on-quarter (QoQ) basis to $12.3 billion in Q2 FY2026 from $2.7 billion in Q1, although it undershot ICRA’s forecast of $17 billion, owing to stronger-than-expected remittance flows and slightly lower merchandise trade deficit (MTD).
  
• Net financial flows slumped to just $0.7 billion in Q2 FY2026 from $8.4 billion in Q1 FY2026, owing to turnaround in FPI to net outflows in the quarter and lower FDI inflows. Consequently, forex reserves depleted by $10.9 billion in Q2 FY2026, as against an accretion of $4.5 billion in Q1.
  

“-” denotes outflows and vice versa; Source: RBI; CEIC; ICRA Research