India’s Current Account Deficit Narrows to 1.1% in Q3FY25

Ira Singh
Khabar Khabaron Ki,28 March’25

India’s current account deficit (CAD) narrowed to 1.1% of GDP, or $11.5 billion, in the third quarter of FY25, compared with 1.8% in the previous quarter, according to data released by the Reserve Bank of India (RBI) on March 28. While the deficit remained higher than the $10.4 billion recorded in Q3FY24, the improvement from the previous quarter reflects a positive trend in trade balances.

According to information,India’s merchandise imports grew 6% year-on-year in Q3FY25 to $186.7 billion. However, higher global demand contributed to a rise in exports, which reached $109 billion, helping to ease the goods trade deficit. The services trade balance also played a crucial role in narrowing the current account gap, as India’s strong service sector exports continued to offset merchandise trade shortfalls.

The narrowing trend was further reinforced by a significant contraction in India’s merchandise trade deficit, which dropped to a 42-month low of $14 billion in February. The decline was driven by reduced imports and lower exports during the month, signaling a shift in external trade dynamics.

A lower current account deficit is crucial for India’s external stability, reducing reliance on capital inflows and mitigating risks associated with global financial market volatility.

The improvement in Q3FY25 suggests a more balanced trade environment, though sustained export growth and stable capital flows will be key to maintaining this trajectory in the coming quarters, noted experts.