India's External Sector Holds Steady Amidst Global Trade Volatility

India's external sector remains stable with a projected current account deficit of 1% of GDP by FY26. The outlook is bolstered by easing commodity prices, steady service exports, and moderating trade pressures. A potential India-US trade agreement may further enhance export dynamics.

India's external sector is demonstrating resilience, maintaining stability despite recent fluctuations in global trade data. A report by Union Bank of India projects the current account deficit (CAD) to hover around 1% of GDP by the fiscal year 2026, buoyed by declining commodity prices, steadfast service exports, and alleviating trade pressures.

The analysis highlights that oil prices are expected to remain moderately bearish into December 2025, factoring in ample global supply, increasing inventories, and cooling demand conditions. This trend is poised to support India's trade and current account dynamics significantly, due to the economy's acute sensitivity to crude oil prices.

The report further indicates normalization for gold imports in both volume and value. Despite high prices and festive demand, overall purchases have stabilized, reducing pressure on the trade deficit. Additionally, the nearing conclusion of an India-US bilateral trade agreement holds potential benefits for India's export progression.

(With inputs from agencies.)