India's current account deficit seen widening to USD 57 billion in FY27 on higher imports: ICICI Bank
New Delhi, November 14
India's current account deficit is expected to widen to USD 57 billion, or 1.4 per cent of GDP, in FY27 as stronger domestic demand and higher oil prices keep imports elevated despite robust export growth, according to a report by ICICI Bank.
The bank also expects India's goods trade deficit to reach USD 380 billion during the financial year, compared with its earlier estimate of USD 388 billion, with gold imports likely to remain moderate.
"Goods exports have seen a stellar performance in the fiscal year so far (22% YoY), but stronger domestic demand and higher oil prices have driven goods imports higher too (16% YoY)," the report said.
India's merchandise trade deficit widened to nearly USD 40 billion in October, its highest level in 12 months, from USD 30.2 billion in September. The increase was driven by a higher oil deficit of USD 14 billion and a non-oil, non-gold deficit of USD 20 billion.
Goods exports rose 45 per cent year-on-year to a record USD 49 billion in October, supported by a 140 per cent jump in oil shipments and 33 per cent growth in non-oil exports.
However, goods imports increased 17 per cent to a record USD 89 billion, with oil imports rising 54 per cent and non-oil, non-gold imports growing 29 per cent.
The report said services exports are likely to record moderate growth amid softer demand due to disruptions from artificial intelligence, while remittances are expected to remain steady. Net services exports rose 13 per cent year-on-year to USD 19.8 billion in October.
On the external financing front, the bank said the recent turnaround in foreign portfolio investment (FPI) flows had improved the outlook for the rupee. India received FPI inflows of USD 8.8 billion in November so far, following a period of outflows.
"This makes us more constructive on INR, along with the recent measures by RBI," the report said, while cautioning that any escalation in the West Asia conflict could pose a near-term concern.
The bank noted that India's balance of payments remained in surplus during the first half of FY27, supported by strong banking capital inflows, including deposits under the FCNR scheme.
— ANI
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