NEW DELHI: India’s current account deficit (CAD) is expected to widen sharply to 1.5 per cent of GDP in FY27 from 0.6 per cent in FY26, as higher crude oil and commodity prices increase pressure on the country’s external balance, according to Crisil’s ‘Trade First Cut’ report for July 2026.“We expect the current account deficit (CAD) to widen to 1.5% of gross domestic product (GDP) in fiscal 2027 vs 0.6% in fiscal 2026,” Crisil said in the report.The ratings agency said rising oil prices would remain the biggest driver of the widening merchandise trade deficit. “Oil remains the main driver of the goods trade deficit. Higher on-year crude oil and commodity prices will weigh on the CAD,” it said.Crisil expects crude oil prices to average $82-87 per barrel this fiscal, compared with an average of $70.3 per barrel in the previous financial year.At the same time, it cautioned that the outlook for crude prices remains uncertain due to geopolitical tensions in the Middle East. “In light of recent geopolitical escalations in West Asia, the sustainability of the interim agreement remains a monitorable,” the report said.The forecast comes after official trade data released earlier this week showed India’s merchandise trade deficit widened to $30.4 billion in June, up from $28.2 billion in May and $19.1 billion in the year-ago period, as imports grew at a faster pace than exports.Merchandise imports rose 31 per cent year-on-year to $70.8 billion in June, accelerating from 20.6 per cent growth in May. According to Crisil, the increase was largely driven by core imports, which exclude oil and gems and jewellery.Core imports grew 31.4 per cent, led by electronic goods, machinery and chemicals, while crude oil imports increased 40 per cent year-on-year.Meanwhile, merchandise exports grew 15.5 per cent year-on-year to $40.4 billion in June, slower than the 18 per cent growth recorded in May. Petroleum exports nearly halved sequentially to $4.9 billion, reflecting a 20.3 per cent month-on-month decline in average Brent crude prices.The services sector continued to cushion the external account, although its surplus narrowed. Preliminary estimates showed services exports rising 2.9 per cent year-on-year in June, while imports increased 12.7 per cent, resulting in the services trade surplus declining to $15.1 billion from $16.2 billion a year ago.“Meanwhile, goods exports will face persistent global trade disruptions, partly offset by robust services,” Crisil said.
