India's current account deficit likely to rise to 2.2 pc of GDP in FY27 over elevated oil prices
New Delhi, June 18
India's current account deficit is expected to rise to 2.2 per cent of gross domestic product in FY27 from 0.6 per cent in FY26, as elevated energy prices will weigh on the external balance, a report said on Thursday.
The report from Crisil Ratings forecasted Brent crude to average $90-95 per barrel this fiscal, around 32 per cent higher than in fiscal 2026.
Oil remains the biggest source of the goods trade deficit. Despite the expected resolution of geopolitical uncertainties in West Asia and the announced reopening of the Strait of Hormuz, energy prices are expected to remain elevated on-year as it will take several months for supplies to normalise fully.
India's merchandise exports saw a broad-based 18 per cent acceleration on-year to $45.2 billion in May, compared with 13.8 per cent acceleration to $43.6 billion in April, the report said.
Merchandise imports surged 20.6 per cent on-year to $73.4 billion after 10.0 per cent growth to $71.9 billion in April.
India's merchandise trade deficit widened to $28.2 billion in May 2026 from $22.6 billion a year ago, though it narrowed a bit from $28.4 billion in April.
Petroleum exports were up 54.9 per cent YoY and core exports (goods excluding oil and gems and jewellery) rose 12.3 per cent to $34.2 billion.
Gems and jewellery rebounded to 6.7 per cent growth, while a jump in petroleum exports was due to a statistical low-base effect.
Brent crude averaged $107.1 per barrel in May, down 8.7 per cent from April. Sequentially, oil exports fell to $8.4 billion in May from $9.6 billion in April, led by lower crude oil prices on-month, after the extraordinary surge in the past two months on account of the conflict in West Asia.
Outside West Asia, India's exports to the US continued to improve ($8.8 billion vs $8.5 billion in April), reflecting the positive impact of lower tariffs. However, given the continuing uncertainty around tariff levels, the trajectory of these exports remains monitorable.
— IANS
Reader Comments
Finally some good news on exports! 18% growth in May is impressive, especially with gems and jewellery rebounding. But that $28.2 billion trade deficit is scary 😱. With oil prices this high, we're basically exporting dollars to import crude. Time to fast-track ethanol blending and solar energy—our farmers and entrepreneurs are ready!
I'm a small businessman from Mumbai, and this oil price volatility hits us directly. Transport costs have already gone up 15% this year. The government should consider reducing excise duties on fuel temporarily and invest more in public transport. Also, why are we still so dependent on West Asian oil? We have refineries, but upstream exploration is lagging badly.
Interesting numbers. So the CAD widening from 0.6% to 2.2% is significant but still manageable historically. India has been through worse (2013 taper tantrum was around 4.8%!). The key here is services exports and remittances which often offset goods deficits. However, if tariffs with the US keep changing, that $8.8 billion export figure might not last. Fingers crossed 🤞
As a student of economics, I find this report from Crisil quite detailed. One thing I notice—the Strait of Hormuz reopening is good for supply, but "several months" is a worry. We need more strategic petroleum reserves (we have only 9 days of cover as of last check). Also, the EU and US are investing billions in green energy, why can't India go bigger on offshore wind and floating solar? It's not just about CAD, it's about energy security.
M Michael C