India's Capital Account Surplus Could Reach USD 105 Billion in FY27, Driven by Higher Foreign Inflows: Report

India's capital account surplus is projected to increase to nearly USD 105 billion, equivalent to 2.6% of GDP, in FY27 as stronger foreign capital inflows are expected to support the country's external finances, according to a report by Motilal Oswal Financial Services (MOFS). The brokerage attributed the improved outlook to several factors, including increased foreign direct investment (FDI), stronger portfolio investments, higher external commercial borrowings (ECBs), and fresh inflows through Foreign Currency Non-Resident (Bank) [FCNR(B)] deposits.

The report highlighted that India's external sector has become more resilient in recent years, largely due to consistent growth in services exports and robust remittance inflows. It noted that the country continues to generate a monthly services trade surplus of around USD 16–17 billion, helping offset the deficit in merchandise trade.

During the first quarter of FY27, India's services exports grew 6.2% year-on-year to USD 103.4 billion, while imports stood at USD 54 billion, resulting in a services trade surplus of USD 49.4 billion, the report said. Overall exports of goods and services rose 11.4% compared with the same period last year, reaching USD 232.7 billion during the quarter.

Despite this positive performance, MOFS expects India's merchandise trade deficit to widen to approximately USD 406 billion, or 9.9% of GDP, in FY27, up from USD 337 billion (8.6% of GDP) in FY26. However, it believes the larger goods trade gap will be largely balanced by a record services trade surplus of nearly USD 238 billion and net transfer inflows estimated at USD 158 billion.

As a result, the brokerage forecasts the country's current account deficit (CAD) to increase only moderately to around USD 60 billion, or 1.5% of GDP, compared with USD 25 billion (0.6% of GDP) in the previous financial year. The report expects policy measures introduced by the Reserve Bank of India (RBI) and the Government to attract an additional USD 75–80 billion in foreign capital. It also estimates that the inclusion of more Indian government securities in global bond indices could bring in another USD 15–20 billion through passive investment flows.

These inflows are expected to more than cover the projected current account deficit, allowing India to record an overall balance of payments (BoP) surplus of roughly USD 45 billion, or 1.1% of GDP, in FY27. This marks a notable improvement over the brokerage's earlier forecast, which had anticipated a BoP deficit of around USD 7 billion under the assumption of crude oil prices at USD 95 per barrel.

The report further stated that the India-UK Comprehensive Economic and Trade Agreement (CETA), which came into effect on July 15, 2026, is likely to strengthen India's external sector over the long term by expanding trade opportunities with developed and emerging markets. Reflecting these positive developments, MOFS revised its FY27 capital account surplus estimate upward to USD 105 billion (2.6% of GDP) from its previous forecast of USD 80 billion (2.0% of GDP), citing a more favourable outlook for foreign capital inflows and external stability.