India's current account deficit may widen to $57 billion in FY27 on imports

what happened

ICICI Bank expects India's current account deficit to widen to $57 billion, or 1.4% of GDP, in FY27. The bank cites strong domestic demand and higher oil prices, which keep imports elevated even as goods exports grow robustly. It now sees the goods trade deficit at $380 billion for the year, down from its earlier $388 billion estimate.

India's merchandise trade deficit widened to nearly $40 billion in October, the highest in 12 months, up from $30.2 billion in September. Goods exports hit a record $49 billion, while goods imports also reached a record $89 billion, with oil imports up 54%. Net services exports rose 13% year on year to $19.8 billion.

On financing, the bank said a turnaround in foreign portfolio investment flows had improved the rupee outlook, with $8.8 billion of inflows so far in November. It warned that escalation in the West Asia conflict could be a near-term concern.

why it matters

A widening current account gap typically pressures the rupee, so portfolio inflows and recent Reserve Bank of India measures matter for currency markets. Higher oil prices also raise the import bill, leaving India sensitive to energy costs.

market impact

Rupee and Indian markets: a wider deficit weighs on the currency, while capital inflows support it

• ↔Indian rupee mixed — a wider deficit pressures the rate, but portfolio inflows offset part of that pressure
• ↔Brent mixed — higher oil prices raise India's import bill, though the link to demand is indirect

tags

instruments