02 - 09 - 2026

Crisil expects India’s current account deficit to rise to 1.5% of GDP

India’s current account deficit (CAD) is expected to rise to 1.5 per cent of the Gross Domestic Product (GDP) this fiscal from 0.6% a year ago, while it widened marginally to $4.2 billion in the first quarter of this year.

The rise during the quarter was from $3.4 billion (0.4 per cent of GDP) in the corresponding period last fiscal, according to a report by Crisil Limited.

“Elevated oil and commodity prices are likely to keep the import bill high in this fiscal, while global trade disruptions and slower economic growth will continue to weigh on goods exports. Elevated crude oil prices are likely to exert additional pressure on the current account,” Crisil said.

Crisil expects Brent crude to average $82-87 per barrel this fiscal, around 20 per cent higher than last fiscal.

Oil remains the single largest contributor to the goods trade deficit, accounting for 36 per cent of the total last fiscal. At the same time, goods exports are likely to remain under pressure from global trade disruptions and slower economic growth.

Measures announced by the Reserve Bank of India (RBI) and the government in June have strengthened financial inflows across segments. As a result, the Balance of Payment position is expected to improve in the coming quarters, supported by a rebuilding of forex reserves.

The widening of CAD to $4.2 billion in the first quarter of this fiscal, underscores the resilience of the external sector despite the conflict in West Asia.

The increase was driven by a wider goods trade deficit, which rose to $86.1 billion from $68.9 billion. Imports climbed sharply to $218.0 billion from $181.6 billion amid elevated commodity prices, while exports increased at a slower pace to $132.0 billion from $112.7 billion. The impact was partly mitigated by strong services exports, which lifted the services trade surplus to $51.6 billion from $47.9 billion.

Secondary income, largely comprising remittances, also remained strong, increasing to 4.8 per cent of GDP in the first quarter from 3.7 per cent a year earlier. However, this component warrants close monitoring, given that about 38 per cent of remittance inflows originate from West Asia, where geopolitical risks remain elevated.

The primary income account deficit narrowed to 1.2 per cent of GDP from 1.6 per cent, while the secondary income account surplus widened to 4.8 per cent from 3.7 per cent.

Net financial outflows were 0.7 per cent of GDP, compared with net inflows of 1.1 per cent a year earlier. Higher net outflows in foreign portfolio investments (FPI) and financial derivatives outweighed the increase in net foreign direct investment (FDI) inflows.