Falling crude prices, surplus services exports & steady remittance to keep India’s CAD in comfort zone: Crisil

NEW DELHI: Falling crude oil prices, a surplus in services exports and steady remittance inflows are expected to prevent India’s current account deficit (CAD) from widening sharply, even as goods exports face pressure from global headwinds, according to a report by Crisil.

The report stated that India’s CAD is expected to remain in the comfort zone at an average of 1 per cent of GDP in fiscal 2026, compared with 0.6 per cent of GDP in fiscal 2025.

While goods exports are likely to come under pressure during the current fiscal due to US tariff hikes and an expected slowdown in global growth, supportive factors on the import and invisible earnings side are expected to limit the widening of the deficit.

It stated, “We believe falling crude oil prices, the surplus in services and healthy remittances will keep the CAD from widening too much.”

A current account deficit (CAD) occurs when a country’s total imports of goods, services, and transfers exceed its total exports and transfers out, resulting in a net outflow of money to the rest of the world.

Crisil noted that falling crude oil prices, a sustained surplus in services exports and healthy remittance inflows will help contain the CAD.
Reflecting this trend, the current account deficit narrowed to 1.3 per cent of GDP in the second quarter of fiscal 2026, compared with 2.2 per cent in the corresponding quarter of fiscal 2025.

On the commodity front, the report expects crude oil prices to average between USD 60 and USD 65 per barrel in calendar year 2026, compared with an estimated USD 65-70 per barrel in 2025.

Brent crude oil prices declined to an average of USD 63.6 per barrel in November, marking a 1.6 per cent decline on-month and a sharp 14.5 per cent fall on-year. Lower crude prices are seen as a key factor in easing India’s import bill and supporting external stability.

The report also assessed the government’s fiscal position. The Union Budget has targeted a reduction in the Centre’s fiscal deficit to 4.4 per cent of GDP in fiscal 2026, from 4.8 per cent of GDP in fiscal 2025.

To meet its funding needs, the government plans to borrow Rs 6.77 lakh crore, or 46.1 per cent of the budgeted borrowings, in the second half of the fiscal.

Overall, gross market borrowing for fiscal 2026 is estimated at Rs 14.7 lakh crore, which is 5 per cent higher on-year.

However, the fiscal deficit stood at 52.6 per cent of the full-year budget target until October, higher than 46.5 per cent in the corresponding period last year. This was driven by lower tax revenues and higher capital expenditure.

At the same time, higher non-tax revenues and lower revenue expenditure helped cap a further rise in the deficit, the report added.

Overall, Crisil said supportive external factors and calibrated fiscal management are expected to help maintain macroeconomic stability despite global uncertainties. (ANI)