Rising Oil, Gold Imports May Push India’s CAD to 2% of GDP: ICICI Securities
Strong exports and services surplus offer limited relief as high crude prices and import pressures widen trade gap
NEW DELHI, May 16: India’s current account deficit (CAD) could widen to 1.5–2 per cent of GDP in the current fiscal if elevated crude oil prices and rising gold imports continue to pressure the country’s external balance, according to a report by ICICI Bank Global Markets.
The report said the ongoing tensions in West Asia and expectations of global crude prices averaging nearly USD 100 per barrel are likely to increase import costs despite healthy growth in services exports. It added that restricting non-essential imports and improving capital inflows would be crucial to containing the deficit.
India’s merchandise exports began FY27 on a strong note, rising 14 per cent year-on-year to USD 43.6 billion in April. The increase was largely driven by petroleum shipments, which surged 35 per cent annually to USD 9.6 billion amid firm international oil prices. Non-oil exports also recovered, rising 9 per cent to USD 34 billion.
Electronics exports emerged as a key growth driver, touching a record USD 5.2 billion with a 40 per cent increase over the previous year. Engineering goods and chemical exports also registered gains, while marine products and mineral shipments improved. However, exports of gems and jewellery, textiles, agricultural products, and ceramics witnessed declines.
Exports to the United States rose modestly by 1.1 per cent to USD 8.5 billion as tariff conditions gradually normalized. Shipments to other major markets, including China, Hong Kong, Singapore, the United Kingdom, and Germany, recorded stronger growth. In contrast, exports to West Asia declined sharply due to disruption in trade routes linked to the Strait of Hormuz situation.
Imports climbed 10 per cent year-on-year to USD 71.9 billion in April. Gold imports jumped 82 per cent to USD 5.6 billion, while non-oil and non-gold imports increased 15 per cent to USD 47.7 billion. Oil imports fell on an annual basis due to a high base effect but rose sharply from March levels as crude prices crossed USD 105 per barrel.
Electronics and machinery imports also touched record highs, accounting for a significant share of the import basket.
The widening import bill pushed the goods trade deficit to USD 28.4 billion in April from USD 20.7 billion in March. After accounting for services trade, India recorded an overall goods and services deficit of USD 7.8 billion compared to a marginal surplus in the previous month.
The services sector continued to provide support, with net services exports rising 29 per cent year-on-year to USD 20.6 billion. Gross services exports increased to USD 37.2 billion during the month.
The report also flagged concerns over capital flows, noting that foreign portfolio investors have pulled out nearly USD 10 billion so far in FY27. ICICI Securities said inflows could improve once global market volatility linked to technology and commodity trends eases.
The brokerage stressed that policy support aimed at curbing discretionary imports and easing investment-related regulations would be important to safeguard India’s external position in the coming months.
