Mumbai, Dec 1 (PTI) India's current account deficit narrowed to USD 12.3 billion or 1.3 per cent of GDP in the September quarter on the back of a reduction in the trade deficit, higher services exports and higher remittances by the diaspora, the RBI said on Monday.

The CAD (current account deficit), an important indicator of a country's external strength, stood at USD 20.8 billion, or 2.2 per cent of the GDP in the year-ago period. However, it was just USD 2.4 billion or 0.2 per cent of the GDP in the preceding June quarter.

For the first half of FY26, the current account deficit declined to USD 15 billion or 0.8 per cent of GDP from USD 25.3 billion or 1.3 per cent of GDP in the year-ago period.

When compared year-on-year, the merchandise trade deficit came down to USD 87.4 billion in the July-September quarter against USD 88.5 billion in the same period a year ago, the central bank said.

Net services receipts increased to USD 50.9 billion from USD 44.5 billion a year ago, data on the balance of payments showed. Services exports have increased, especially in computer services.

Personal transfer receipts under secondary income account, mainly representing remittances by Indians employed overseas, rose to USD 38.2 billion in the reporting quarter from USD 34.4 billion in the year-ago period, the RBI said.

Net outgo on the primary income account, mainly reflecting payments of investment income, increased to USD 12.2 billion in Q2 from USD 9.2 billion in Q2 FY25.

Foreign direct investment (FDI) recorded a net inflow of USD 2.9 billion in Q2 FY26 against a net outflow of USD 2.8 billion in the corresponding period of the last fiscal.

In the case of foreign portfolio investment (FPI), there was a net outflow of USD 5.7 billion in the period compared to a net inflow of USD 19.9 billion in Q2 FY25.

Net inflows under external commercial borrowings reduced to USD 1.6 billion in Q2 FY26 from USD 5 billion in the year-ago period, the RBI said.

There was a decline in the deposits by NRIs during the quarter to USD 2.5 billion from USD 6.2 billion in the year-ago period.

On a BoP basis, there was a depletion of USD 10.9 billion to the foreign exchange reserves against an accretion of USD 18.6 billion in Q2 FY25, the RBI said. PTI AA BAL BAL

India's current account deficit narrows to 1.3% of GDP as trade gap, services exports and remittances improve. India's current account deficit narrowed to USD 12.3 billion (1.3% of GDP) in Q2, driven by a lower merchandise trade deficit, higher net services receipts-especially computer services-and increased remittances. For H1 the CAD fell to USD 15 billion (0.8% of GDP). Financing patterns showed net FDI inflows, FPI outflows, reduced external commercial borrowings and lower NRI deposits, while primary income payments rose and foreign exchange reserves were depleted over the quarter.