A CRISIL report estimates India’s current account deficit (CAD) to widen to 1.5% of GDP by FY2027. The main reason for this has been said to be the increase in the prices of crude oil and commodities.
New Delhi [भारत]July 17 (ANI): India’s current account deficit (CAD) is expected to widen to 1.5 per cent of gross domestic product (GDP) in FY 2026-27 as higher crude oil and commodity prices put pressure on the country’s external balance, according to CRISIL’s ‘Trade First Cut’ report for July 2026. It was 0.6 percent in the last financial year.
“We expect the current account deficit (CAD) to widen to 1.5% of gross domestic product (GDP) in FY2027 from 0.6% in FY2026,” Crisil said in the report.
Crude oil prices will increase losses
The ratings and analytics firm cited oil as the main reason for India’s goods trade deficit. “Oil remains the main driver of the merchandise trade deficit. Higher year-on-year crude and commodity prices will put downward pressure on the CAD,” the report said.
CRISIL estimates that crude oil prices will average between $ 82 and 87 per barrel this financial year, which is higher than the average of $ 70.3 per barrel last financial year.
However, the report indicated uncertainty over oil prices amid geopolitical events in West Asia. “Given recent geopolitical tensions in West Asia, the sustainability of the interim agreement needs to be monitored,” it said.
Trade deficit increased in June
Trade data released earlier this week showed India’s goods trade deficit widened to $30.4 billion in June, from $19.1 billion a year earlier and $28.2 billion in May. This happened because imports grew at a much faster rate than exports.
Sharp increase in imports
Merchandise imports rose 31 percent year-on-year to $70.8 billion in June, compared to 20.6 percent in May. CRISIL attributed the increase to a sharp rise in core imports, which exclude oil and gems and jewellery. Core imports rose 31.4 percent, led by electronic goods, machinery and chemicals, while crude oil imports rose 40 percent despite lower prices.
slow pace of exports
Meanwhile, the growth rate of merchandise exports slowed to 15.5 percent year-on-year in June, taking exports to $40.4 billion. In comparison, the growth in May was 18 percent and exports stood at $45.2 billion. Petroleum exports almost halved sequentially to $4.9 billion, as average Brent crude prices fell 20.3 percent month-on-month.
No relief even from service sector
Services provided some support to the external balance, but their surplus also declined. Preliminary estimates showed that services exports rose 2.9 percent year-on-year in June, while imports rose 12.7 percent. As a result, the services trade surplus declined to $15.1 billion from $16.2 billion a year ago.
“Meanwhile, goods exports will continue to face persistent global trade headwinds, partially offset by stronger services,” CRISIL said. (ANI)
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