India’s CAD in FY27 may rise to 2% of GDP even if oil stays at $87/barrel

India's current account deficit (CAD) is likely to touch 2% of GDP under higher oil price scenarios, according to a report by Crisil. 

The report stated that in its base case scenario, assuming exports benefit from US tariff relaxations and crude oil prices average between $75-80 per barrel, the CAD is expected to widen to 1.5% of GDP in fiscal 2027, compared to a projected 0.8% in fiscal 2026.

However, in an alternate scenario where crude oil prices stay at $82-87 per barrel, which the report noted appears plausible given current global conditions, the CAD could increase to 2%. It added that a healthy services trade surplus is expected to limit the extent of the widening deficit.

The report stated, "If oil price were to rise to $82-87/bbl, which is our alternate case and looks plausible now, then the CAD could rise to 2.0% of GDP."

The report highlighted that the ongoing West Asia conflict and its duration and scale remain critical factors to monitor, as they could significantly impact global trade and commodity prices. 

Elevated uncertainties and subdued global growth, particularly in the case of supply shocks, may weigh on exports despite some expected support from reduced US tariffs. 

 -ANI