NEW DELHI: India’s trade deficit is likely to widen to $300 billion in the financial year 2025-26, even though oil prices are expected to remain moderate, according to a recent report by ICICI Bank. The projected deficit will be 7.0 per cent of the country’s GDP, higher than the $287 billion recorded in FY25 and $245 billion in FY24.
The report stated, “We see goods deficit widening to $300bn (7.0 per cent of GDP) in FY26. But steady inflows in case of services exports and remittances should ensure a CAD of $30bn (0.7 per cent of GDP)”. The report highlighted that while oil prices may not surge sharply, the widening trade deficit will be driven mainly by weak performance in non-oil exports. On the other hand, imports are expected to stay strong due to the strength in domestic growth.
A trade deficit occurs when a country’s imports are more than its exports, while a current account deficit is a broader measure that includes the trade deficit plus other international transactions like investment income and remittances from other countries.
As per the bank’s assessment, the global economic environment remains uncertain due to geopolitical developments and the threat of trade wars. Despite this, India’s economy is expected to stay resilient, supported by fiscal and monetary stimulus measures.
The report also noted that rural demand is holding up well, and sectors like services, exports and domestic travel are continuing to expand. The report also expects services exports and remittances to remain steady in FY26. However, growth in these areas could slow down, mainly because of weaker demand from the US.
Taking these factors into account, the report projects India’s current account deficit (CAD) to stand at $30 billion in FY26, which is 0.7 per cent of GDP. In FY25, India’s trade deficit rose to $287 billion, up from $245 billion in FY24, due to a 6.2 per cent increase in imports.
While exports in the current fiscal year have shown a modest growth of 3.1 per cent year-on-year so far, this rise is largely led by a strong 22 per cent increase in exports to the US, whereas exports to other countries declined by 1.2 per cent. Despite the challenges in global trade and expected pressure on exports, the report remained optimistic about India’s external position.
It said, “FPI and FDI inflows should see improvement as the domestic growth cycle is improving. Overall, BoP to see a mild surplus”. (ANI)
