India’s balance of payments is expected to shift to a surplus of $25-30 billion by FY27, driven by a narrowing current account deficit and higher capital inflows. This improvement reflects lower crude oil import costs and resilient services exports. Investors may note that while this supports the rupee, the Reserve Bank of India could manage volatility by adjusting its forward foreign exchange book.
India is on track to record a balance of payments surplus of $25-30 billion in the 2027 financial year, marking a shift after two consecutive years of deficits, according to recent projections by CareEdge Ratings. This turnaround is supported by a narrower current account deficit, which is now expected to range between 0.8% and 1.2% of GDP.
Drivers of External Improvement
The expected improvement in the current account is largely linked to moderating crude oil prices, which are assumed to average between $80 and $85 per barrel throughout the year. Additionally, India’s services sector remains a critical support, with exports growing 6.1% in the first quarter of FY27 following a strong performance in the previous fiscal year. Remittance inflows also continue to show momentum, having risen to $155 billion in FY26. These factors collectively help in reducing the net outflow of foreign currency, providing a more stable base for the economy.
Capital Inflow Expectations
CareEdge projects the capital account surplus to reach approximately $73 billion in FY27, compared to an estimated $2 billion in the previous year. Net foreign direct investment is anticipated to climb to $15 billion, up from $6.9 billion in FY26, as gross inflows remain healthy and the pace of repatriation slows. Furthermore, policy initiatives by the Reserve Bank of India, including various swap windows for deposits and commercial borrowings, are expected to attract $45-60 billion in capital inflows during the year.
Currency Outlook and Potential Risks
While the stronger external position generally favors the Indian rupee, the potential for rapid appreciation may be limited. The Reserve Bank of India has built a significant forward foreign exchange book, which rose to $107 billion by the end of May 2026. Experts suggest that the central bank may choose to unwind parts of this position to manage currency stability.
Investors should monitor geopolitical tensions in West Asia, which remain a key risk factor. Such disruptions could impact global oil prices or trigger sudden volatility in the currency markets, potentially altering the current outlook. The trajectory of the USD/INR exchange rate, which is forecasted to average between 93 and 94 for FY27, will remain a primary metric to watch alongside future RBI commentary on its foreign exchange operations.