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New Delhi, April 16 (ANI): India’s trade deficit, which narrowed unexpectedly in March 2026, may widen again in FY27 due to global uncertainties, rising oil risks, and weakening export demand, according to a report by Yes Securities.
March 2026 Trade Deficit Falls Below Expectations
India’s trade deficit stood at USD 21 billion in March 2026, lower than market expectations. This improvement was mainly driven by a temporary decline in imports along with a slight recovery in exports on a month-on-month basis.
However, analysts caution that this trend may not sustain in the coming months.
Sharp Drop in Gold and Oil Imports
A significant factor behind the reduced trade gap was the fall in imports:
- Gold imports dropped to around USD 3.1 billion
- Oil imports declined to approximately USD 12.2 billion
The report highlights that this decline was not entirely due to reduced demand. Instead, supply disruptions—particularly linked to the Strait of Hormuz closure—played a key role.
Such supply-side constraints may reverse once global logistics normalize, potentially increasing India’s import bill again.
Oil Market Volatility Remains a Concern
Despite recent easing in crude oil prices due to geopolitical developments, experts warn that:
- Infrastructure restoration will take time
- Supply chains may remain unstable
- Oil price volatility could continue
If crude prices rise to USD 85–95 per barrel, India’s external balance could face additional pressure.
Export Growth Weak Amid Global Demand Slowdown
India’s export sector continues to face challenges:
- Exports declined 7.3% year-on-year in March 2026
- Global demand is expected to remain weak in FY27
This slowdown could limit export growth and widen the trade imbalance.
Weak Industrial Imports Signal Slower Domestic Growth
The report also noted a decline in imports of industrial inputs, indicating:
- Slower production expectations
- Weak domestic economic momentum
While this has temporarily reduced imports, any economic recovery could increase imports without a proportional rise in exports.
Remittances and Current Account Deficit Risks
Another key concern is the potential decline in remittances from Gulf countries, which could further strain India’s external balance.
Although India’s services sector remains strong, with a net services surplus of USD 18.2 billion, it may not fully offset the pressure from merchandise trade.
CAD Expected to Rise in FY27
Yes Securities estimates that India’s Current Account Deficit (CAD) could widen to:
- USD 70.1 billion (1.6% of GDP) in FY27
- Potentially 1.6%–2.0% of GDP if oil prices remain elevated
Outlook: Temporary Relief, Long-Term Risks
The report concludes that the narrowing of India’s trade deficit in March is likely temporary. A combination of:
- Rising imports
- Weak export demand
- Global economic uncertainty
could lead to a widening trade gap in FY27.
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