India’s Current Account Deficit Expected to Expand to 1.5% of GDP by FY27 Amid Rising Oil Prices
NEW DELHI: India’s current account deficit (CAD) is projected to rise sharply to 1.5% of GDP in FY27, up from 0.6% in FY26. This increase is attributed to higher crude oil and commodity prices, which are expected to exert significant pressure on the country’s external balance, according to Crisil’s ‘Trade First Cut’ report for July 2026.
Crisil noted that rising oil prices will be the primary factor driving the widening merchandise trade deficit. The agency anticipates that crude oil prices will average between $82 and $87 per barrel this fiscal year, compared to an average of $70.3 per barrel in the previous year. However, the outlook for crude prices remains uncertain due to ongoing geopolitical tensions in the Middle East.
The report follows the release of official trade data indicating that India’s merchandise trade deficit expanded to $30.4 billion in June, up from $28.2 billion in May and $19.1 billion in the same month last year. Imports surged 31% year-on-year to $70.8 billion in June, driven largely by core imports, which exclude oil and gems and jewellery. Core imports increased by 31.4%, led by electronic goods, machinery, and chemicals, while crude oil imports rose by 40% year-on-year.
In contrast, merchandise exports grew by 15.5% year-on-year to $40.4 billion in June, a slowdown from the 18% growth recorded in May. Petroleum exports nearly halved sequentially to $4.9 billion, reflecting a 20.3% month-on-month decline in average Brent crude prices. The services sector continued to support the external account, although its surplus narrowed, with services exports rising 2.9% year-on-year in June.
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