Current account deficit to almost double in FY26: Here's why
What's the story
India's current account deficit (CAD) is likely to nearly double in the fiscal year 2025-26, a Union Bank of India report has said. The CAD is projected to rise from 0.6% of GDP in FY25 to 1.2% in FY26, it added. The estimate carries an upward risk due to changing trade conditions and fluctuations in global commodity prices.
Influencing factors
Geopolitical developments and oil prices major factors
The report also highlighted that geopolitical developments, including tariff issues and potential trade deals between India and the US or Europe, are likely to significantly influence trade dynamics. Oil prices remain a major factor, with estimates suggesting that a $10 per barrel change in oil prices could affect the annual current account balance by around $15 billion.
Trade imbalance
India's merchandise trade deficit widened sharply
India's merchandise trade deficit widened sharply in July 2025, hitting $27.35 billion against $18.78 billion a month ago. The widening was driven by a normalization of imports after a temporary spike last month, even as the trend of frontloading exports continued. The growth rate of imports, especially fossil fuels and capital goods, outpaced export growth by a wide margin, leading to an imbalance.
Trade deficits
NONG trade deficit spikes
The NONG (Non-Oil, Non-Gold) trade deficit witnessed the sharpest spike, rising to $12.28 billion from $7.83 billion in June 2025. The oil trade deficit also widened to $11.24 billion against $9.19 billion last month. Meanwhile, the gold trade deficit nearly doubled, jumping to $3.83 billion from June's figure of $1.76 billion.
Trade surplus
Services trade surplus sees marginal decline
The services trade surplus witnessed a marginal month-on-month decline after an upward revision to June 2025's data. The services trade surplus fell to $15.63 billion in July from the previous month's figure of $16.21 billion. The average for April-July 2025 stood at $15.88 billion, compared to last year's same period average of $13.59 billion.