Motilal Oswal’s report estimates that India’s capital account surplus will increase to $105 billion by FY 2027. This will be possible through strong foreign capital inflows, external borrowings and better portfolio investments. Increase in service exports is also a major reason for this.
New Delhi [भारत]July 15 (ANI): India’s capital account surplus is expected to widen to about US$105 billion or 2.6 per cent of gross domestic product (GDP) in FY2027, supported by strong foreign capital inflows, higher external commercial borrowings (ECBs), fresh FCNR(B) deposits, better portfolio investment and stronger foreign direct investment (FDI), according to a report by Motilal Oswal Financial Services.
The brokerage firm said India’s external sector has become stronger due to steady growth in service exports and remittance inflows. She said the country has consistently been recording a monthly services trade surplus of about US$16-17 billion, which provides a strong cushion against the merchandise trade deficit.
“During Q1FY27, services exports grew 6.2% YoY to $103.4 billion, while imports stood at $54.0 billion, resulting in a healthy services trade surplus of $49.4 billion,” the report said.
According to the report, total exports of goods and services during the quarter increased by 11.4 percent year-on-year to $232.7 billion.
Trade deficit and current account estimates
MOFS expects India’s goods trade deficit to widen to $406 billion or 9.9 per cent of GDP in FY27 from $337 billion or 8.6 per cent of GDP in FY26.
However, it said its impact was likely to be offset by a record services trade surplus of about $238 billion and net transfer inflows of about $158 billion. “We expect the current account deficit to widen modestly to $60 billion (1.5% of GDP) in FY26 from $25 billion (0.6% of GDP),” the report said.
Capital Flow Outlook
Highlighting the capital inflows outlook, the brokerage said, “Recent initiatives by the RBI and the Government of India are expected to attract additional foreign capital inflows of $75-80 billion, while inclusion of additional Indian government securities in global bond indices could generate further passive inflows of $15-20 billion.”
These inflows are expected to comfortably finance the estimated current account deficit of $60 billion, resulting in an overall balance of payments (BoP) surplus of about $45 billion or 1.1 per cent of GDP in FY27, the report said. This is a significant improvement from the earlier estimate of BoP deficit of about $7 billion under the oil price assumption of $95 per barrel.
India-UK Trade Agreement and Revised Estimates
The brokerage also said the India-UK Comprehensive Economic and Trade Agreement (CETA), which came into force on July 15, 2026, will provide a strong structural boost to India’s external sector as the country expands its network of free trade agreements with major developed and emerging economies.
“We now expect a strong recovery in capital flows, resulting in a capital account surplus of around $105 billion (2.6% of GDP) in FY27, compared to our earlier expectation of around $80 billion (2.0% of GDP) under a higher oil price scenario,” the report said. (ANI)
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