India Economics Weekly: How much capital flows can we expect?

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India Economics Weekly: How much capital flows can we expect?

Deutsche Bank

Research

Economics Date

India Economics Weekly 12 June 2026

How much capital flows can we expect?

Kaushik Das

* FY27 BOP and capital flows projections update: We update our FY27 BOP Chief Economist

projections post the announcement of the various measures by the RBI in the 5th +91-22-7180-4909

June monetary policy to attract capital flows over the next few months. We also

take into account the Jan-March’26 BOP data that was released recently, which

showed strong momentum in net invisibles, which led the current account

balance to turn into a larger-than-anticipated surplus of USD 7.1 bn (0.7% of GDP)

in that quarter.

When the war started in end-Feb, we revised our FY27 current account deficit

forecast higher to 2.0% of GDP, or USD 83 bn (from 0.6% of GDP, USD 25.2 bn

in FY26), assuming USD 95/barrel average oil for this fiscal year. Then the

government hiked import duty on gold in May from 6% to 15%. Gold imports

amounted to USD72 bn in FY26. The higher import duty will likely result in about

USD7-8 bn lower gold imports, as per our assessment, which can potentially

reduce current account deficit by a similar amount or to about USD 75 bn for

FY27. Without the capital flow-incentivizing measures announced by the RBI on

5th June, India would have still probably got about USD25 bn capital flows,

resulting in a BOP deficit of USD 50 bn. Given the measures that were announced

in the June policy, if India ends up attracting additional foreign capital flows of

USD 50bn, then the BOP gap will be closed for FY27, which will help stabilize the

rupee. Taking into account the recent measures announced by the RBI and GOI,

we now forecast India’s BOP to become balanced in FY27, assuming at least