DistantNews
Support us
India's current account may widen in FY27
🇴🇲 Oman /Economy & Trade

India's current account may widen in FY27

From Times of Oman · () English

Summarized and contextualized by DistantNews.

At a glance

News Documents & data Context piece
  • India's current account deficit is projected to widen in fiscal year 2027, driven by an anticipated increase in the goods deficit to $390 billion.
  • This widening is attributed to strong domestic demand and elevated imports, particularly in oil and non-oil, non-gold categories.
  • Despite the growing goods deficit, the current account deficit is expected to remain manageable due to robust services exports and a significant rise in remittances.

India's current account deficit is likely to widen in fiscal year 2027, with projections indicating a rise in the goods deficit to approximately $390 billion. This forecast, according to ICICI Bank, is primarily fueled by robust domestic demand and a surge in imports.

The bank's report highlights a significant increase in India's goods deficit in the first quarter of FY27, reaching $85.7 billion compared to $68.9 billion in the same period last year. This expansion was largely driven by higher oil prices and a notable increase in non-oil, non-gold imports. The deficit in these specific categories alone grew to $55 billion in April-July FY27 from $42 billion a year prior.

Remittance inflows seem to be front-loaded in Apr-May when as much as $29.5 billion of inflows were seen as against $11.9 billion in June.

— ICICI BankAnalysis of remittance trends impacting India's current account.

However, the overall current account deficit remained relatively contained in Q1 FY27 at $6.2 billion, a shift from a surplus of $1.2 billion in the previous year. This stability was supported by a 9% year-on-year increase in services exports, which reached $52.2 billion, and a substantial 34% year-on-year rise in remittances to $41.4 billion. ICICI Bank noted that remittance inflows appeared front-loaded, with a significant portion recorded in April-May.

Looking ahead, ICICI Bank anticipates that the goods deficit will hover around $265 billion for the remaining eight months of FY27, assuming slightly lower oil prices. This compares to $237 billion in the same period last year. Despite these pressures, capital flows are expected to support the Indian Rupee in the second half of the fiscal year. Foreign portfolio investor equity flows have reversed from outflows to inflows, and debt inflows have strengthened, partly due to changes in government securities taxation and a more positive currency outlook. India's prospective inclusion in the Bloomberg index is also expected to sustain passive debt inflows into FY28.

goods deficit is estimated to increase to USD 390 billion in FY27

— ICICI BankProjection for India's goods deficit in the upcoming fiscal year.
DistantNews Editorial

Originally published by Times of Oman. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

More Stories

From Our Blog