India Viewpoint: The Problem of the Rupee: Anatomy of India’s current account (Part 2)

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India Viewpoint: The Problem of the Rupee: Anatomy of India’s current account (Part 2)

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India Viewpoint

The Problem of the Rupee: Anatomy of

India’s current account (Part 2)

India has a balance of payments issue… 12 May 2026

In part 1 of our BoP series, we took a deep dive on the capital account issue, showing GEM Economics

the structural headwinds it faces, resulting in a weaker exchange rate and financing Asia | India

issues. This fundamental challenge, which was visible before the war in West Asia, has Rahul Bajoria

been exacerbated by the expected widening in current account funding needs, due to India & ASEAN Economist

higher energy prices, potentially weaker exports and remittances. Continuing the series- BofAS+91 22India6632 3095

we now look at the India’s current account dynamics, both its structural and cyclical rahul.bajoria@bofa.com

challenges, examining what makes it a near term risk. Smriti Mehra

India Economist

…with current account set to slide over its 2% constraint BofAS+91 22India6632 8314

India’s current account deficit appears set to exceed ~2% of GDP – which the RBI has smriti.mehra@bofa.com

historically identified as the threshold level that India can finance sustainably over the

long term. However, in recent years, even a 1% of GDP has been difficult to finance due Glossary

to a confluence of factors in the capital and financial account (see: Part 1 of the series) BoP: Balance of Payment

CY: Calendar Yearleading to persistent weakness in the exchange rate. We now explore whether the ECB: External commercial borrowing

current account deficit is a structural issue and the risks emanating from geopolitical FCNR: Foreign currency non-resident

uncertainties can be sticky and explore what has been making the current account account