MONTHLY CAD DATA GIVES A MORE GRANULAR PICTURE

MONTHLY CAD DATA GIVES A MORE GRANULAR PICTURE

Till the last fiscal year, the current account data used to be released on a quarterly basis. It would be typically released about 3 months after the end of the quarter. That means, the CAD data for the June quarter would be released towards the end of September. That delayed CAD communication substantially. However, the government has shifted the reporting to a monthly basis from May this year.

Now CAD is being reported, with the complete breakup, on a monthly basis with a lag of 1 month. So, May data gets reported in mid-July and June data gets reported in mid-August. As of date, we have the monthly data on CAD for the month of June and May, as well as the quarterly data for Q1FY27. This has enabled a more granular analysis of current account deficit trends in the Indian economy.

KEY TAKEAWAYS FROM THE JUNE 2026 CAD

Here are some key takeaways from the monthly CAD data announced.

For the month of June 2026, the monthly currently account deficit (CAD) stood at $(6.20) billion. This is in contrast to a surplus of $1.2 billion in June 2025.

For the month of May 2026, the current account deficit stood at $(2.0) billion, which is again in contrast to the surplus of $0.70 billion reported in May 2025.

The widening of the CAD in June 2026, compared to May 2026 can be largely attributed to pressure on the merchandise trade deficit due to higher crude oil prices.

In May and June 2026, the big positive has been the net transfers into India. This is largely on account of increasing global activity being outsourced to India.

Let us turn to the more granular picture of the monthly current account deficit.

CAD BASKET IN JUNE 2026 AND MAY 2026

Here is an itemized comparison of CAD in June and May 2026.

Data Source: RBI

Here are quick thoughts on CAD basket for Q4FY26.

On the current account downside, the merchandise trade deficit and the interest payouts increased in June over May. This led to a widening of the current account deficit in the month of June over May.

Services surplus has improved in June over May. However, there is some pressure visible in the structural growth in services surplus. The impact of AI is limiting the export earnings of the IT sector and that is leading to a saturation of services surplus.

Foreign remittances have fallen in June, as compared to May, and that substantially contributed to the CAD expanding by more than 3-fold in June compared to May 2026.

There is pressure on the CAD, due to the higher merchandise deficit and the lower remittances in June. There are also structural challenges to service exports. The good news is that the capital account looks more comfortable despite FPI outflows.

CAD BASKET FOR FINANCIAL YEAR FY27 OVER FY26

Here is a quick look at how CAD looked at the end of the financial year.

Data Source: RBI

If we extrapolate the Q1FY27 GDP for the full year, the number seems to be largely under control. The concern is; what would be the impact if the situation in the Middle East prolongs. That is the X-factor for the CAD. With the rupee already under pressure, India cannot afford a widening of the CAD. The positive is that capital account looks better and the deluge of FCNR(B) flows and OFCB/ECB flows should make things a lot better!