India's Trade Deficit May Surge to $300 Billion in FY26
India's trade gap is anticipated to expand to USD 300 billion in the financial year 2025-26, even though oil prices are projected to remain steady, according to a recent report from ICICI Bank.
The report emphasized that, while oil prices might not experience a significant rise, the growing trade deficit will primarily be a result of poor performance in non-oil exports. Conversely, imports are expected to remain robust due to strong domestic growth.
A trade deficit arises when a country's imports exceed its exports, while a current account deficit is a broader term that includes the trade deficit along with other international transactions such as investment income and remittances from abroad.
According to the bank's findings, the global economic landscape remains uncertain due to geopolitical factors and the possibility of trade conflicts.
Nonetheless, India’s economy is predicted to remain resilient, bolstered by fiscal and monetary stimulus initiatives. The report also pointed out that rural demand is performing well, and sectors such as services, exports, and domestic travel continue to grow.
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The report anticipates that services exports and remittances will remain stable in FY26.
However, growth in these sectors may decelerate, primarily due to weaker demand from the US.
Considering these elements, the report estimates India’s current account deficit (CAD) to be USD 30 billion in FY26, which accounts for 0.7 percent of GDP.
In FY25, India’s trade deficit increased to USD 287 billion, compared to USD 245 billion in FY24, driven by a 6.2 percent rise in imports.
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Although exports in the current fiscal year have experienced modest growth of 3.1 percent year-on-year up to now, this increase is predominantly fueled by a strong 22 percent rise in exports to the US, while exports to other countries have decreased by 1.2 percent.
Despite the obstacles in global trade and anticipated pressure on exports, the report expressed a positive outlook regarding India’s external position.