India's BoP surplus to hit $50 bn in FY27, CAD at 1%: SBI Research

SBI Research projects India's balance of payments will see a surplus of around USD 50 billion in FY27, with the current account deficit contained at 1% of GDP, thanks to strong foreign currency inflows improving the country's external position.

India's balance of payments (BoP) is expected to post a surplus of around USD 50 billion in FY27, with the current account deficit (CAD) likely to remain contained at 1 per cent of GDP, as strong foreign currency inflows improve the country's external position, according to SBI Research.

Inflows and External Position

The Ecowrap report said the Reserve Bank of India's special FCNR(B) deposit mobilisation scheme has already attracted USD 57 billion in inflows, while another USD 25-30 billion could flow in during the remaining days of August, taking total collections to around USD 85 billion. "The balance of payment will be in surplus of around USD 50 bn with CAD at 1% of GDP," the report said.

The Reserve Bank of India had also said in its latest Monetary Policy Committee meeting that India's external financing position remained supportive, with strong FDI and FPI inflows supporting capital flows. It said the balance of payments was expected to register a healthy surplus this year.

SBI Research said the early closure of the FCNR(B) window was unlikely to have a meaningful impact on external liquidity, estimating that total inflows through FCNR(B), overseas foreign currency borrowings (OFCBs) and external commercial borrowings (ECBs) could reach USD 80-85 billion.

Cost Analysis of RBI Swap

The report also argued that concerns over the cost of the RBI's swap facility are overstated. It estimated the five-year cumulative hedging cost at USD 10.5 billion, equivalent to just 1.45 per cent of India's current foreign exchange reserves of around USD 700 billion and about 1.27 per cent of projected reserves over five years.

According to the report, the notional cost of the FCNR(B) swap "remains relatively small compared with the size of the reserve buffer being built," making it an effective tool for strengthening India's external liquidity position.

Currency Outlook and Global Risks

On the currency outlook, SBI Research said the rupee's appreciation following the FCNR(B) measures has so far been limited to around 0.1 per cent, compared with a much stronger appreciation after the 2013 FCNR(B) scheme. It expects the rupee to appreciate in the Rs 95-95.5 per US dollar range through the end of August and beyond, although the magnitude is likely to differ from 2013.

The report also highlighted growing global risks, including 30-year US Treasury yields nearing 5.3 per cent and the possibility of Brent crude rising towards USD 100 per barrel if disruptions around the Strait of Hormuz persist.

Reserve Management Strategy

SBI Research further said the RBI should continue diversifying its reserve portfolio, noting that gold's share in India's foreign exchange reserves reached a record 16.7 per cent in FY26 before moderating slightly to 15.38 per cent as of August 7, underscoring the importance of building greater portfolio resilience. (ANI)

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