- July 19, 2026
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Individual estimates now range from 0.9 per cent to 2 per cent of GDP, compared with projections of as high as 2.4 per cent before crude oil prices retreated. India’s CAD was 0.6 percent of GDP in FY26.
The revisions were triggered by a sharp fall in crude oil prices following the de-escalation of tensions in West Asia. Since crude accounts for about 22 per cent of India’s import basket, lower oil prices are expected to reduce the import bill.
Economists also cited resilient services exports and remittance inflows as supporting factors.
Oil prices had surged after the US-Iran conflict raised fears of supply disruptions through the Strait of Hormuz, a key global oil shipping route.
Even with the recent flare-up of tensions between Iran and the US, economists expect crude oil prices to remain range-bound. India’s crude oil basket has declined from $114.5 per barrel in April to $83.22 per barrel in June. It stood at $81.4 per barrel as of July 16.
CareEdge Ratings revised its FY27 CAD forecast to 0.8-1.2 per cent of GDP from 2.1 per cent. Rajani Sinha, chief economist, CareEdge Ratings, said the revision reflects a lower crude price assumption of $80-85 per barrel. “We have also raised our export growth projection,” she said, adding that resilient services exports and remittances could push the CAD below 1 per cent of GDP if oil prices remain subdued.
IDFC First Bank revised its CAD estimate to 1.7 per cent of GDP from 2.4 per cent earlier, and lowered its crude price assumption to $75-80 per barrel from $90 per barrel earlier. “This is based on the expectation that crude oil price will correct quickly once geopolitical risks subside,” said Gaura Sengupta, chief economist. The estimate also factors in stronger-than-expected exports to Asia and Africa, lower gold imports due to softer prices and higher import duties, she said.
Bank of Baroda (BoB) is among the few institutions that has kept its forecast unchanged at 1.8-2 per cent of GDP, despite lowering its crude oil assumption to $75-85 per barrel.
“We expect the trade deficit to widen and support from services and remittances to slow down. The same acceleration won’t be there. I don’t think it’s (trade deficit) going to narrow down any time soon,” said Madan Sabnavis, chief economist, Bank of Baroda said.
India’s trade balance, including both merchandise and services trade, declined to $20.85 billion in the June quarter from $37.4 billion during the same quarter a year ago.
While forecasts have been revised lower, economists say the key risk is no longer the CAD, but financing it through stable capital inflows.
Crisil Chief Economist Dharmakirti Joshi also mentioned the crude oil assumptions leading to a downward revision of CAD estimates, saying the main issue is capital flows. “Steps by the Reserve Bank of India (RBI) and government should help,” he added.
“The problem was not about the CAD. It was more about whether we had adequate capital money — capital flows — to finance that current account. I think RBI has helped bridge the gap with the help of the measures that it’s announced,” said Upasna Bhardwaj, senior economist at Kotak Mahindra Bank, which has retained its FY27 CAD estimate at 1.5 per cent of GDP.
The RBI in June announced a series of measures to attract foreign capital, including bearing the full hedging cost on new three- to five-year Foreign Currency Non-Resident (Bank) or FCNR(B) deposits and offering concessional forex swaps for public sector companies raising overseas borrowings.
Despite differing forecasts, economists broadly agree that India’s external position remains comfortable. “Overall CAD below 2 per cent of GDP is manageable,” Sengupta said.
