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India's current account deficit is expected to widen to 1.5 per cent of gross domestic product (GDP) in fiscal 2026-27 from 0.6 per cent in the previous fiscal, as higher crude oil and commodity prices weigh on the country's external balance, according to Crisil's Trade First Cut report for July 2026.
"We expect the current account deficit (CAD) to widen to 1.5% of gross domestic product (GDP) in fiscal 2027 vs 0.6% in fiscal 2026," Crisil said in the report. The ratings and analytics firm identified oil as the main factor driving India's merchandise trade deficit. "Oil remains the main driver of the goods trade deficit. Higher on-year crude oil and commodity prices will weigh on the CAD," it said. Crisil expects crude oil prices to average between USD 82 and USD 87 per barrel this fiscal, higher than the average of USD 70.3 per barrel in the previous fiscal. However, the report flagged uncertainty over the oil price outlook amid geopolitical developments in West Asia. "In light of recent geopolitical escalations in West Asia, the sustainability of the interim agreement remains a monitorable," it said. The trade date released earlier this week showed India's merchandise trade deficit widening to USD 30.4 billion in June from USD 19.1 billion a year earlier and USD 28.2 billion in May, as imports grew at a much faster pace than exports. Merchandise imports surged 31 per cent year-on-year to USD 70.8 billion in June, accelerating from 20.6 per cent growth in May. Crisil attributed the increase mainly to a sharp rise in core imports, which exclude oil and gems and jewellery. Core imports grew 31.4 per cent, led by electronic goods, machinery and chemicals, while crude oil imports rose 40 per cent despite lower prices. Meanwhile, merchandise export growth slowed to 15.5 per cent year-on-year in June, taking exports to USD 40.4 billion, compared with 18 per cent growth and exports worth USD 45.2 billion in May. Petroleum exports nearly halved sequentially to USD 4.9 billion as average Brent crude prices fell 20.3 per cent month-on-month. Services provided some support to the external balance, but their surplus also narrowed. Preliminary estimates showed services exports growing 2.9 per cent year-on-year in June, while imports rose 12.7 per cent. As a result, the services trade surplus declined to USD 15.1 billion from USD 16.2 billion a year earlier. "Meanwhile, goods exports will face persistent global trade disruptions, partly offset by robust services," Crisil said. (ANI)
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