India’s current account deficit for the second quarter of CY26 is approximately 1.5% of the gross domestic product as of June-end, according to a report. The capital account and overall balance of payments are expected to remain in deficit for the quarter, as per HSBC Global Investment Research.
The report also predicts inflation to average nearly 5% in FY27. Debt inflows increased in June, and the external position is anticipated to improve with non-resident Indian deposits under the Reserve Bank of India’s foreign exchange scheme flowing through later in the third quarter.
In June, India’s goods trade deficit slightly widened to $30.4 billion from $28.2 billion in March, with the net oil trade deficit remaining unchanged at $14.5 billion due to softer oil and gold prices. However, the net non-oil, non-gold trade deficit expanded to $15 billion.
Non-oil export growth stood out, growing for a third consecutive month with an average growth of about 8% month-on-month. This growth was supported by lower US tariffs, which facilitated an acceleration in shipments. Exports to the US increased by an average of 5% month-on-month, with engineering goods, electronics, gems, and jewellery showing strong sequential growth in Q2 2026.
June’s CPI inflation was reported at 4.4% year-on-year, higher than the previous month. Excluding gold and silver, headline CPI stood at 3.6% year-on-year. Inflation has not yet become broad-based, with around 70% of items in the CPI basket rising at less than 4% year-on-year, according to the diffusion index.
Food inflation surged higher than expected, primarily driven by a widespread increase in cereals, protein items (milk, egg, meat, and fish), and edible oil. Despite notable price hikes in tomatoes, chillies, and garlic, vegetable prices decreased sequentially. The report highlighted that El Niño conditions are expected to worsen, with above-normal temperatures and lower reservoir levels compared to the same period last year, contributing to sustained high food prices.
