New Delhi [India], July 18 : India's current account deficit (CAD) is likely to see a marginal rise in FY26 as there is minor upward risk on it, noted a report by Union Bank of India.
However, the UBI report maintained its earlier forecast of a widening CAD to 1.2 per cent of GDP in FY26, compared to an estimated 0.9 per cent in FY25. The report also mentioned that there are downside risks to the FY25 estimate.
It stated, "We see a marginal upward risk to our estimate for current account (C/A) deficit for FY26 GDP."
The report noted that the increase in global commodity prices, especially oil and metals, could put upward pressure on the trade deficit. If the current trend in rising commodity prices continues, it may impact India's trade dynamics negatively.
On the other hand, weak global growth and concerns around exports might limit this impact to some extent.
The report said, "The uptrend seen in commodity prices, if sustained, would dampen trade dynamics."
Geopolitical developments will also play a key role in shaping the current account outlook.
The report mentioned that risks such as global tariff concerns and any trade agreements India may sign with countries like the US and those in Europe will affect trade performance.
It also noted that the persistent trade tensions pose a downside risk to India's domestic growth, which could possibly result in a lower current account deficit in FY25 than currently estimated.
Despite these concerns, the report also highlighted some positive trends. India's invisible surplus, particularly from the services sector, remained strong in FY25.
The services trade surplus stood at USD 188.75 billion, which helped offset the oil import deficit of USD 122.45 billion.
The report also drew attention to geopolitical tensions in the Middle East and their potential impact on oil prices. It warned that India's current account remains highly sensitive to oil price movements.
It stated that for every USD 10 per barrel change in oil prices, India's annual current account balance could be affected by as much as USD 15 billion.
The report expects a marginal increase in India's CAD in FY26, strong service exports and careful monitoring of global commodity and geopolitical trends will be key in managing the overall balance.
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