India’s Current Account Deficit May Widen to 1.5% of GDP in FY 2026–27: Crisil

India’s current account deficit (CAD) is projected to increase to 1.5% of gross domestic product in fiscal year 2026–27, compared with 0.6% in the preceding financial year, according to Crisil’s July 2026 Trade First Cut report.

The expected deterioration in India’s external balance is primarily linked to higher crude oil and other commodity prices. Crisil estimates that crude oil could average between USD 82 and USD 87 per barrel during the current fiscal, substantially above the previous year’s average of USD 70.3 per barrel.

Oil imports are expected to remain the principal contributor to the country’s merchandise trade deficit. However, Crisil noted that geopolitical developments in West Asia continue to create uncertainty around crude oil prices and warrant close monitoring.

India’s merchandise trade deficit expanded to USD 30.4 billion in June 2026, up from USD 19.1 billion in June 2025 and USD 28.2 billion in May 2026. The widening was driven by imports growing significantly faster than exports.

Merchandise imports increased 31% year-on-year to USD 70.8 billion during June, accelerating from the 20.6% growth recorded in May. Core imports—which exclude crude oil, gems and jewellery—rose 31.4%, supported by increased purchases of electronic goods, machinery and chemicals. Crude oil imports also climbed 40% despite comparatively lower prices.

Merchandise exports rose 15.5% year-on-year to USD 40.4 billion in June. This represented a moderation from May, when exports expanded 18% to USD 45.2 billion.

Petroleum product exports declined sharply on a month-on-month basis to USD 4.9 billion, coinciding with a 20.3% sequential fall in average Brent crude prices.

India’s services sector continued to partially offset the merchandise trade imbalance, although its surplus narrowed. Preliminary estimates indicated that services exports grew 2.9% year-on-year in June, while services imports increased 12.7%. Consequently, the services trade surplus declined to USD 15.1 billion from USD 16.2 billion in the corresponding period of the previous year.

Crisil expects global trade disruptions to continue affecting merchandise exports. Nevertheless, the country’s relatively resilient services trade is likely to provide some support to the overall current account position. CA Sansaar