India's current account deficit shrinks to $5.2bn in August

India's external account position strengthened in August as the current account deficit contracted year-on-year, reflecting improved trade dynamics and sustained foreign investment flows into the Indian economy. The Reserve Bank of India's latest balance of payments data showed the narrowing deficit signals moderating pressure on the rupee and improved forex reserves management.

Capital account performance proved particularly robust, with banking sector inflows providing significant support to the overall balance of payments position. The $45.4 billion surplus recorded in August underscores continued investor confidence in India's economic prospects despite global uncertainties affecting emerging markets.

The improvement in the current account deficit comes at a time when India has been managing external pressures from global inflation and monetary tightening by major central banks. The contraction of nearly $900 million compared to August of the previous year suggests strengthening competitiveness in India's merchandise trade and healthy service sector exports.

Economists attribute the narrower deficit to a combination of factors including moderating import growth and resilient service sector earnings. The strong capital inflows demonstrate that foreign investors continue to view India as an attractive destination for both portfolio and direct investments, providing stability to the nation's external accounts.