The RBI brass also expects a rise in remittances, which will boost the country’s forex reserves, as the Gulf demand for India’s hard-hatted workers should increase. The region remains collectively the biggest remittance generator for India.
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The country registered a net BoP deficit of $24.4 billion in the third quarter of FY26 against a deficit of $37.7 billion in Q3 FY25. The current account deficit remained moderate at 1.3% of GDP in the third quarter.
“We do need to continue the good work that has been done on both the current account and on the capital account. And that makes me confident that the BOP position should improve going forward,” Reserve Bank of India (RBI) governor Malhotra said at a post-policy press conference.
“Never let a crisis go to waste,” Malhotra said, reflecting on the steps being taken by the government to make India less reliant on imported oil.
He pointed out that production of oil and gas has been ramped up while accelerated adoption of electronic vehicles and focus on renewable energy should eventually lower the reliance on fossil fuels.”All these things which the government is already doing, need to ramp up so that the oil import burden reduces,” he said.
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Indian exporters are also looking at expanding their market worldwide following the US tariff-led disruptions. The government is also proactively looking at expanding markets through various schemes and through various trade agreements.
“There is an opportunity for us to recognize this and continue and accelerate some of the works which have been in the pipeline to improve our trade balance,” Malhotra said.
On remittances, deputy governor Poonam Gupta expects an improvement.
“We are not anticipating a dent to remittances, if the crisis is going to be resolved very soon. We anticipate, actually, the demand for migrant workers will, in fact, increase from this region (middle east), which will help the remittances further,” she said.
To be sure, remittances nowadays come from a rather diverse set of regions, in which the share of the Gulf countries has declined over time.
“When I talk about the diversity, it’s not just the geographical diversity, it’s also the kind of skill pool we have across different countries. We have relatively low-skilled, medium-skilled, and high-skilled migrant workers who send these remittances. So if we look at the past 10-15 years of data, they have moved only in one direction, which is the upward direction,”she said.
On the earnings from, while the merchandise exports are under pressure due to geopolitics, expected robustness in services exports and inward remittance receipts during the fourth quarter of FY26 is expected to keep India’s current account deficit moderate and within the sustainable level, RBI said.