India's capital account surplus may rise to $105 billion in FY27: Motilal Oswal

New Delhi: India's capital account surplus is expected to rise to around USD 105 billion, or 2.6 per cent of GDP, in FY27, supported by stronger foreign capital inflows, higher external commercial borrowings (ECBs), fresh FCNR(B) deposits, improved portfolio investments, and resilient foreign direct investment (FDI), according to a report by Motilal Oswal Financial Services.

The brokerage said India's external sector has become more resilient due to steady growth in services exports and remittance inflows. It noted that the country continues to record a monthly services trade surplus of around USD 16-17 billion, providing a strong cushion against the merchandise trade deficit.

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"During 1QFY27, service exports increased 6.2% YoY to USD 103. 4b, while imports stood at USD 54. 0b, resulting in a healthy services trade surplus of USD 49. 4b," the report said.

According to the report, total exports of goods and services rose 11.4 per cent year-on-year to USD 232.7 billion during the quarter.

MOFS expects India's merchandise trade deficit to widen to USD 406 billion, or 9.9 per cent of GDP, in FY27 from USD 337 billion, or 8.6 per cent of GDP, in FY26. However, it said the impact is likely to be offset by a record services trade surplus of about USD 238 billion and net transfer inflows of around USD 158 billion.

"We expect the current account deficit to widen only modestly to USD 60b (1.5% of GDP) from USD 25b (0.6% of GDP) in FY26," the report said.

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Highlighting the outlook for capital flows, the brokerage said, "Recent initiatives by the RBI and the Government of India are expected to attract USD75-80bn of incremental foreign capital inflows, while the inclusion of additional Indian government securities in global bond indices could generate another USD15-20bn of passive inflows."

The report said these inflows are expected to comfortably finance the projected current account deficit of USD 60 billion, resulting in an overall balance of payments (BoP) surplus of around USD 45 billion, or 1.1 per cent of GDP, in FY27. This is a significant improvement from its earlier estimate of a BoP deficit of around USD 7 billion under an oil price assumption of USD 95 per barrel.

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 inflows, resulting in a capital account surplus of around USD 105 bn (2.6% of GDP) in FY27, compared with our earlier expectation of around USD 80 bn (2.0% of GDP) under the higher oil price scenario," the report noted.