India's current account deficit may widen to 2.2% of GDP in FY27 due to costlier crude, gas and fertilisers: Crisil
New Delhi, June 9
India's current account deficit is expected to widen sharply to 2.2 per cent of GDP in the current financial year 2026-27, up from 0.6 per cent in the previous fiscal, as higher prices of crude oil, natural gas and fertilisers significantly increase the country's import bill, according to a report by Crisil.
The report said costlier energy imports and weaker exports amid global trade disruptions are likely to put pressure on India's external balance during the current fiscal year.
"We expect the CAD to widen to 2.2 per cent of GDP this fiscal, up from 0.6 per cent last fiscal. Costlier crude oil, natural gas and fertilisers will crank up India's import bill significantly this fiscal, while exports are heading for a decline due to global trade disruptions and weakening demand," the report stated.
Crisil also highlighted risks to remittance inflows from West Asia due to the ongoing conflict in the region. According to the report, around 38 per cent of India's total remittances originate from Gulf countries, making them vulnerable to any prolonged disruption.
However, the report noted that a healthy services trade surplus is expected to provide some cushion against the widening current account deficit.
India's current account balance had improved in the fourth quarter of fiscal 2026, recording a surplus of USD 7.1 billion, equivalent to 0.7 per cent of GDP. This marked a significant improvement from a deficit of USD 15.5 billion in the third quarter of the fiscal year.
Despite the return to surplus, the report noted that the latest quarterly surplus was nearly half of the USD 13.7 billion surplus, or 1.4 per cent of GDP, recorded in the corresponding quarter of the previous fiscal year.
The lower surplus was largely due to a sharp rise in the goods trade deficit. According to Crisil, the goods trade deficit widened to USD 83.4 billion in the fourth quarter of fiscal 2026 from USD 59.3 billion in the same period of the previous fiscal.
Imports increased to USD 196.6 billion from USD 175.8 billion a year earlier, while exports declined slightly to USD 113.1 billion from USD 116.5 billion. The report said exports were also impacted to some extent by the West Asia conflict.
At the same time, a stronger services trade surplus provided support to the external account. The services trade surplus rose to USD 60.4 billion in the fourth quarter of fiscal 2026 compared with USD 53.3 billion in the corresponding period of the previous fiscal.
On a cumulative basis, India's current account deficit stood at USD 25.2 billion in fiscal 2026 compared with USD 22.9 billion in fiscal 2025. However, as a percentage of GDP, it remained stable at 0.6 per cent.
The report noted that the widening goods trade deficit, which increased to 8.0 per cent of GDP from 7.5 per cent, was offset by a rise in the services trade surplus to 5.1 per cent of GDP from 4.9 per cent.
Crisil further pointed out that secondary income, which largely comprises remittances, rose to 3.4 per cent of GDP in fiscal 2026 from 3.2 per cent in fiscal 2025, but said this component would need close monitoring given that nearly 38 per cent of remittances come from West Asia.
— ANI
Reader Comments
Interesting perspective from Crisil. The 2.2% CAD isn't catastrophic yet but definitely a red flag. India's remittance dependence on Gulf countries (38%!) is a huge vulnerability with the ongoing conflict. Hopefully the services surplus continues to grow.
Every time crude prices go up, we feel the pinch. From petrol to fertilizers to cooking gas, everything becomes expensive. Hope our RBI and government have a solid plan. At least the Q4 surplus shows we can manage, but the trend is worrying. 😟
Common sense says we need to reduce import dependence. Why are we not investing more in ethanol blending, electric vehicles, and green hydrogen? The services surplus is a blessing, but we can't keep ignoring structural issues. Fiscal discipline is key.
Good analysis from Crisil. The remittance risk from West Asia is a critical point many miss. But I'm impressed that services trade surplus rose to $60.4B—that's India's strength. If we can boost exports of IT, pharma, and engineering goods, we can offset some of this.
The numbers don't lie. Exports declining to $113.1B from $116.5B is a red flag. Global slowdown is real. But our CAD at 0.6% last year was manageable, and 2.2% is still within safe limits. Need better trade agreements and domestic manufacturing push. 🇮🇳
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