India’s current account deficit to touch 2% of GDP under high oil prices

India faces a crucial challenge of current account deficit (CAD) as a report by CRISIL highlighted that the country might face a challenge of CAD to touch 2 per cent of GDP under higher oil price scenarios.

“If oil prices were to rise to USD 82-87/bbl, which is our alternate case and looks plausible now, then the CAD could rise to 2.0 per cent of GDP,” CRISIL said in its note.

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In its base case scenario, assuming exports benefit from US tariff relaxations and crude oil prices average between USD 75-80 per barrel, the CAD is expected to widen to 1.5 per cent of GDP in fiscal 2027.

In an alternate scenario where crude oil prices stay at USD 82-87 per barrel, which the report noted appears plausible given current global conditions, the CAD could increase to 2.0 per cent of GDP.

Higher crude oil prices, rising gas costs, and increased fertiliser imports could significantly expand the trade deficit. A 23 per cent year-on-year rise in crude prices alone is expected to sharply increase the petroleum import bill, which already constitutes a substantial share of total imports.

“Higher petroleum import bill due to a 23 per cent year-on-year rise in crude prices, along with higher fertiliser prices, will further increase the import burden,” the report noted.

In March, India’s merchandise trade deficit narrowed to $20.67 billion as the decline in imports from a year ago was sharper than the fall in exports.

Merchandise exports in March 2026 were estimated at $38.92 billion, down from $42.05 billion in the same month a year ago. Imports declined more sharply to $59.59 billion from $63.74 billion a year earlier, helping narrow the trade deficit.