India’s current account deficit narrowed sharply in April-June 2025, before 50% US tariffs on exports took effect.

The deficit was at $2.4 billion in April-June as against $8.6 billion in the year-ago period, according to data released by the Reserve Bank of India (RBI) on Monday, helped by an increase in service sector exports—up 21% to $47.9 billion—and larger than anticipated remittances. The current account had a surplus of $13.5 billion in the previous quarter.

A current account deficit indicates that a country is importing more than it’s exporting. A surplus means exports are higher than imports.

“Front-loaded exports to the US and continuously healthy service exports helped lower the fiscal first quarter deficit,” Madhavi Arora, lead economist at Emkay Global Financial Services Ltd., said in a note. “However, payback from last quarter and tariff-led hit to labour-intensive sectors could imply the FY26 deficit could cross 1.2% of GDP with further upside risks.”

US President Donald Trump’s punitive 50% tariffs on India are now among the highest in Asia, leaving Indian goods uncompetitive in the American market. The US is India’s biggest export destination, accounting for a fifth of the country’s total merchandise exports in the year through March 2025, when the South Asian nation shipped $87.4 billion worth of goods.

“While India’s current account expectedly reverted to a deficit, the extent of the same was considerably lower than our projection,” said Aditi Nayar, chief economist at ICRA Ltd., told Bloomberg. “The surprise was largely driven by larger than anticipated remittances. This augurs well, given the uncertainty that lies ahead given the recent tariff-related developments.”

Personal transfer receipts, mainly representing remittances, rose to $33.2 billion from $28.6 billion a year ago, the RBI said.