India’s current account deficit is set to widen to $57 billion in 2026-27, or 1.4 per cent of GDP, according to a new report by ICICI Bank released on Saturday. The bank says strong domestic demand and elevated oil prices will keep imports high through the year, even though exports are growing at a healthy pace.
The forecast puts a number on a tension that has been building for months. India is selling more to the world than ever before, yet it is buying even more. October’s trade data, released by the government on Friday, showed the strain clearly: the merchandise trade deficit widened to nearly $40 billion, its highest in twelve months.
Why the gap is widening
Goods exports have grown 22 per cent year on year so far in FY27, a strong performance by any measure. But imports have risen 16 per cent over the same period, driven by demand at home and higher energy costs.
October illustrated the pattern. Merchandise exports touched a record $49.47 billion, up 45 per cent from a year earlier. Imports, however, climbed to an all-time high of $89.35 billion, leaving a monthly trade deficit of $39.88 billion, up from $30.21 billion in September. Petroleum imports alone stood at $22.82 billion, up more than 54 per cent from a year earlier, reflecting higher crude prices and disruption linked to the conflict in West Asia.
ICICI Bank expects the goods trade deficit for the full financial year to reach $380 billion. That is actually a small improvement on its earlier estimate of $388 billion, helped by gold imports that are likely to stay moderate. Even so, the sheer scale of the import bill means the current account, which also counts services trade and transfers, will end the year wider.
What is working in India’s favour
The picture is not all pressure. The bank noted that India’s balance of payments remained in surplus during the first half of FY27, supported by strong banking capital inflows, including deposits under the FCNR scheme.
There is also good news on the currency front. The recent reversal in foreign portfolio investment flows has improved the outlook for the rupee, according to the report. Foreign investors returning to Indian markets brings in dollars, and that helps steady the currency even when the trade gap is wide.
Services exports, led by IT and business services, are expected to keep growing, though at a more moderate pace as global demand softens. Remittances from Indians working abroad are likely to stay steady, and both remain important shock absorbers for the external account.
The risks to watch
Oil remains the biggest swing factor. India imports nearly 85 per cent of the crude oil it uses, so any spike in global prices feeds straight into the import bill. The report cautions that any escalation in the West Asia conflict could pose a near-term risk to the outlook.
Early data from the Reserve Bank of India underlines the trend. Preliminary figures released on Friday showed the current account deficit at $7.4 billion in September 2026, compared with $5.2 billion in September 2025. The overall balance of payments, however, stayed in surplus.
For now, the $57 billion estimate is a forecast, not a final figure. How it lands will depend on crude prices and whether the strong export run of the first seven months holds up.
What it means for you
It matters most through the rupee and inflation. A weaker rupee makes fuel and imported goods dearer, while a steady flow of foreign investment and services income can keep that pressure in check. The report’s message is that the buffers, foreign investment, services exports and remittances, are holding for now, but the import bill bears watching.
FAQs
What is the current account deficit?
It is the gap between what India earns from the rest of the world through exports, services and transfers, and what it pays out for imports and other payments. A deficit means the country is spending more abroad than it earns.
How big is the deficit expected to be in FY27?
ICICI Bank expects it to widen to $57 billion, or 1.4 per cent of GDP, in the financial year ending March 2027.
Why is the deficit widening if exports are at a record?
Because imports are growing from a much larger base. Exports rose 22 per cent so far in FY27, but imports also rose 16 per cent, and October imports hit a record $89.35 billion, led by oil.
What is supporting the rupee?
A balance of payments surplus in the first half of FY27, strong banking capital inflows including FCNR deposits, and a recent return of foreign portfolio investment.
What could make the outlook worse?
A sharp rise in crude oil prices or any escalation in the West Asia conflict, both of which would push the import bill higher.
India’s external account is being tested by the same forces shaping the global economy: dearer energy, strong domestic demand and uneven trade. The coming months will show whether record exports and steady capital flows are enough to keep the gap in check.
