India's Current Account Deficit Stays Manageable Amid Oil Price Relief

Bank of Baroda's report suggests India's current account deficit will remain under control for FY25 and FY26 due to stable oil prices. Although India's trade deficit widened in October 2024, steady export growth and manageable import costs are helping balance trade dynamics. Challenges include a strong USD and capital outflows affecting INR.

India's current account deficit is expected to stay within a manageable range for FY25 and FY26, as stable oil prices bolster the country's external financial position, according to a report by Bank of Baroda. The report highlights that despite global market volatility, current oil prices are favorable for India's import bill and trade balance.

However, India's merchandise trade deficit has climbed to a 13-month high of USD 27.1 billion in October 2024, led by increased oil and gold imports. Nonetheless, export growth remains robust, with a 17.3% rise in October, driven by non-oil exports, partially offsetting the trade deficit.

Looking forward, the report cautions that global trade trends and rising U.S. protectionism could impact India's export prospects. It underscores that the Indian rupee is under pressure from external factors such as a strong U.S. dollar and capital outflows from emerging markets, potentially affecting its stability.

(With inputs from agencies.)