India's Current Account Deficit Set to Widen Amid Rising Oil Prices: Crisil Report

India's current account deficit is projected to widen to 1.5% of GDP by fiscal 2026-27, driven mainly by higher crude oil and commodity prices, according to Crisil's latest report. Despite a surge in merchandise imports, services exports provided some relief but could not fully offset the deficit.

India's current account deficit (CAD) is anticipated to expand significantly to 1.5% of the GDP in the 2026-27 fiscal year, compared to 0.6% in the previous fiscal period, as outlined in Crisil's Trade First Cut report for July 2026. The main contributors to this widening gap include increased crude oil and commodity prices, exerting pressure on the nation's external balance.

Crisil has earmarked oil as a key factor influencing India's merchandise trade deficit. The analysis reveals that climbing prices of crude oil and other commodities are central to the anticipated CAD increase, with crude prices expected to hover between USD 82 and USD 87 per barrel this fiscal, up from an average of USD 70.3 per barrel last year.

Nevertheless, the report urges caution regarding the volatility of oil prices, especially given geopolitical uncertainties in West Asia. Discussing trade figures, India's merchandise trade deficit expanded to USD 30.4 billion in June from USD 19.1 billion a year prior, with imports surging predominantly in core goods while export growth decelerated.