India’s balance of payments is anticipated to turn into a surplus in FY27 following two years of deficits, driven by increased net foreign direct investment and other capital inflows, as per a report by Care Edge Ratings. The report forecasts a rise in net FDI to $15 billion in FY27 from $6.9 billion in FY26, supported by stronger gross FDI inflows and reduced repatriation.
Moreover, various concessional swap windows for FCNR(B) deposits, External Commercial Borrowings, and Overseas Foreign Currency Borrowings are expected to bring in $45–60 billion of inflows collectively in FY27. The report suggests that the capital account surplus could grow from a modest $2 billion in FY26 to around $73 billion in FY27.
The ratings agency has revised its current account deficit projection for FY27 to 0.8–1.2 per cent of GDP from the earlier estimate of 2.1 per cent. This adjustment is primarily attributed to the moderation in crude oil prices, robust services exports, remittances, and an enhancement in merchandise exports.
The report highlights that the government has implemented various policy measures to attract foreign investments, including expanding the foreign currency bond market, offering tax exemptions for FIIs/FPIs investing in government securities, and increasing investment limits for NRIs and OCIs. Additionally, certain debt-market initiatives address key obstacles to India’s potential inclusion in the Bloomberg Global Aggregate Index, which is expected to bolster foreign portfolio inflows.
Merchandise exports kicked off FY27 on a positive note, with a 15.9 per cent increase in Q1, driven by a 35.1 per cent surge in petroleum exports and a 12.5 per cent rise in non-petroleum exports. The report expresses optimism that this growth trend in merchandise exports will persist, although it cautions about the potential impact of a proposed 12.5 per cent tariff by the US on Indian exports.
