Whalesbook
Deficit Forecast to Reach 2.2%
India's current account deficit is projected to widen significantly to 2.2% of GDP in the current fiscal year, according to rating agency Crisil. This figure represents a substantial increase from the 0.8% deficit recorded in fiscal 2026. The primary drivers identified are soaring global oil prices and ongoing imbalances in merchandise trade, which are impacting the nation's external balance.
Oil Prices Drive Up Costs
The main reason for the widening deficit is Crisil's revised forecast for Brent crude oil prices. The agency now expects Brent crude to average between $90 and $95 per barrel this fiscal year, a jump of about 32% from fiscal 2026. These higher energy costs directly affect India's balance of payments and will test its external finances. Notably, oil makes up 36% of India's total goods trade deficit.
Merchandise Trade and Remittances
Beyond oil prices, goods exports face pressure from global trade disruptions and softening international demand, according to Crisil. Further complicating the situation, ongoing conflict in West Asia could disrupt oil and gas output, potentially impacting vital remittances sent to India from the region. The country's merchandise trade deficit widened to $28.4 billion in April, up from $20.7 billion in March.
Services Sector Offers Buffer
On a more positive note, services exports proved strong, growing 13.4% year-on-year in April. This sector has become a key buffer as services imports declined for a second consecutive month. The resulting services trade surplus grew to $20.6 billion, helping to offset the widening deficit in goods trade and supporting the country's overall trade balance.