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Informist, Friday, Mar. 6, 2026

 

NEW DELHI – India's current account deficit could rise sharply in the financial year 2026-27 (Apr-Mar) if the country imports crude oil at a significantly higher price, DSP Mutual Fund said in a report. The current account deficit could rise to over 3.1% of GDP in FY27, from an estimated 1% of GDP in FY26, if crude oil prices rise beyond $120 per barrel and India imports at this price, according to the report.

 

If India imports crude oil priced beyond $120 per barrel for the entire FY27, the oil trade deficit will jump to $220 billion, as per the report, raising the country's current account deficit beyond 3.1% of GDP. In FY25, India's current account deficit was 0.6% of GDP.

 

The military conflict in West Asia, which completes a week Friday, has already raised Brent crude oil prices to over $85 per barrel from around $70 per barrel prior to the US and Israel's attack on Iran. The price of India's crude oil basket has risen to over $93 per barrel from around $70 per barrel a week ago. 

 

A further rise in crude oil prices will also lead to depreciation of the rupee against the dollar, higher inflation, and a liquidity crunch in the domestic market, DSP Mutual Fund said in its Netra report for March. "In prior episodes, rupee depreciated more than 10% on such occasions if the deficits persisted," it said.

 

The country's crude oil consumption is much higher than what it produces domestically. India consumes about 5.3 million-5.5 million barrels per day of crude oil while its own production is approximately 0.6 million barrels per day. "Import dependence is 85%. Petroleum imports are 25% to 30% of total imports. Every $10 increase in crude (oil price) adds roughly $12–15 bn ($12 billion-$15 billion) to India's annual import bill," the fund house said. "But this correlation is convex, at higher prices, deficit rises sharply."

 

DSP Mutual Fund expects India's large services exports and remittances to help keep the current account deficit from widening to around 4.8% of GDP, as had happened in FY13. "Yet in such years, large inflows of FDI (foreign direct investment) & FPI (foreign portfolio investors) can stabilise India's economy. That seems to be a headwind as of now," it said in its report.

 

India could get a respite from the US announcement of a 30-day waiver for Indian refiners to purchase Russian oil stranded at sea. The announcement by the US Department of the Treasury came in view of the continuing conflict in West Asia.  End

 

US$1 = INR 91.74

 

Reported by Shweta

Edited by Rajeev Pai

 

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