India's current account deficit (CAD) is forecast to widen sharply to 1.5% of GDP in FY27 from 0.6% in FY26, as higher crude oil and commodity prices pressure the country's external balance, according to Crisil's 'Trade First Cut' report for July 2026.
Forecast Highlights
Crisil expects the CAD to widen to 1.5% of gross domestic product (GDP) in fiscal 2027 versus 0.6% in fiscal 2026. The ratings agency noted that 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," Crisil said in the report.
| Metric | FY26 (Actual/Forecast) | FY27 (Forecast) |
|---|---|---|
| CAD as % of GDP | 0.6% | 1.5% |
| Average crude oil price ($/bbl) | 70.3 | 82–87 (range) |
Trade Deficit Dynamics
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% year-on-year to $70.8 billion in June, accelerating from 20.6% growth in May. According to Crisil, the increase was largely driven by core imports (excluding oil and gems and jewellery), which grew 31.4%, led by electronic goods, machinery, and chemicals. Crude oil imports increased 40% year-on-year.
Meanwhile, merchandise exports grew 15.5% year-on-year to $40.4 billion in June, slower than the 18% growth recorded in May. Petroleum exports nearly halved sequentially to $4.9 billion, reflecting a 20.3% month-on-month decline in average Brent crude prices.
Crude Oil Price Outlook
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. The agency 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.
Services Sector Cushion
The services sector continued to cushion the external account, although its surplus narrowed. Preliminary estimates showed services exports rising 2.9% year-on-year in June, while imports increased 12.7%, resulting in the services trade surplus declining to $15.1 billion from $16.2 billion a year ago. Crisil noted that goods exports will face persistent global trade disruptions, partly offset by robust services.
For investors and corporate strategists, the widening CAD signals increased macroeconomic vulnerability, which could influence currency stability, import costs, and policy responses. The reliance on services exports as a buffer underscores the need for monitoring global trade dynamics and oil price movements in the coming months.
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