NEW DELHI: India’s Current Account Deficit (CAD) may narrow to 1.6 per cent of GDP in FY27 as lower oil prices and improving exports support the external sector, as per a report by ICICI Bank.
The report noted India’s goods exports surged by 18 per cent YoY to a record-high of USD 45 billion, with both oil exports (55 per cent YoY), as well as non-oil exports (12 per cent YoY) contributing to the pick-up.
While oil exports sharply increased on a YoY basis at USD 8.4 billion as against USD 5.4 billion in May 2025, they fell sequentially by 12 per cent. At the same time, non-oil exports moved to a 24-month high of USD 36.8 billion, surging by ~12per cent YoY and 8.3per cent MoM.
Additionally, “Agri products (8.8% YoY) and gems and jewellery (6.7% YoY) recovered from contractions seen in the last two months,” the report noted. At the same time, “non-oil-non-gold imports stood at USD 47bn in May, rising by 8.6 per cent YoY.”
According to the report, India’s merchandise trade deficit remained largely unchanged at USD 28.2 billion in May, compared with USD 28.4 billion in April. While the oil trade deficit widened to USD 14.3 billion from USD 9.0 billion in the previous month, this was offset by a narrowing of the non-oil, non-gold deficit to USD 10.5 billion from USD 13.7 billion, along with a sequential decline of USD 2.2 billion in gold imports.
As per RBI’s monthly estimate, India’s current account moved to a surplus of USD 4.7 billion in April 2026, compared with a USD 4.8 billion deficit in April 2025. Thus, the ICICI report noted, “recent RBI measures should ensure incremental inflows to ensure BoP is in surplus in the year.”
ICICI Bank further noted that the recent developments in the West Asia conflict are a positive driving oil prices lower to ~USD 83/bbl levels.
“Trade deficit is likely to be lower than earlier estimates in case oil prices remain closer to USD 85/bbl. Exports too get a leg-up. While there is some level of uncertainty, it is possible for CAD to be at USD 65bn (1.6% of GDP) versus ~2% of GDP if oil prices are higher and exports to GCC are lower,” the report said.
“We see BoP surplus in FY27, after remaining in deficit over the last two years. The Rupee has moved to 94.6/dollar levels from a peak of 96.96/dollar last month, and should see near-term support due to above factors,” the report added. (ANI)
