India’s current account deficit (CAD) could widen to 2 per cent of GDP under higher crude oil price scenarios, according to a report by CRISIL.
The report said that in its base case scenario—assuming support from easing US tariffs and crude oil prices averaging between USD 75–80 per barrel—the CAD is expected to increase to 1.5 per cent of GDP in fiscal 2027, compared to a projected 0.8 per cent in fiscal 2026.
However, under an alternate scenario where crude oil prices remain elevated at USD 82–87 per barrel, the deficit could widen further to 2 per cent of GDP. “If oil prices rise to USD 82–87 per barrel… then the CAD could rise to 2.0 per cent of GDP,” the report noted, adding that a strong services trade surplus is likely to cushion the impact.
The report highlighted that ongoing tensions in West Asia remain a key risk factor, with their scale and duration likely to influence global trade flows and commodity prices.
It also cautioned that global uncertainties and subdued economic growth could weigh on exports, even as reduced US tariffs may provide some support.
On the trade front, India’s goods exports declined 7.4 per cent year-on-year to USD 38.9 billion in March, compared to an average growth of 0.3 per cent in the preceding three months.
The decline was partly attributed to a high base effect due to export frontloading last year ahead of anticipated US tariff hikes, along with disruptions linked to geopolitical tensions.
Sector-wise, gems and jewellery exports saw a sharp contraction of 29.3 per cent. The report noted that the United Arab Emirates has recently overtaken the United States as India’s top destination for these exports. Core exports also fell 7.5 per cent year-on-year, indicating broad-based pressure.
Despite the overall decline, exports to the United States showed some recovery, rising to USD 8 billion in March from USD 6.6 billion in February. This was supported by progress in trade negotiations, with US tariffs on Indian goods reduced from 50 per cent to 18 per cent and later to 10 per cent.
However, the report cautioned that uncertainty around the trade agreement continues to persist.
-ANI
