Trade gap may widen in FY27 amid oil risks

New Delhi

While India's March 2026 trade deficit came in lower than expected, Yes Securities has cautioned that underlying factors point to a likely widening in the coming months, driven by external shocks, slowing global demand, and structural pressures on the import bill.

The report noted that India's March trade deficit surprised at only $21 billion, aided by a temporary compression in imports and a sequential recovery in exports. However, it emphasised that this improvement may not be sustained.

A major reason for the smaller deficit was a sharp drop in imports, especially gold and oil. Gold imports fell to about $3.1 billion, and oil imports declined to around $12.2 billion. However, this decrease was not entirely due to lower demand. The report suggests that the fall may have been caused by the closure of the Strait of Hormuz, which disrupted supply, pointing to supply issues rather than a long-term improvement.

The report warned that such disruptions could reverse as supply normalises, pushing the import bill higher again. Even with the recent easing in crude prices following ceasefire developments, the physical restoration of damaged infrastructure and full normalisation of logistics will be a slower process, suggesting persistent volatility in oil markets.