India CAD may rise to 2.2% in FY27 on $90-95 oil: Crisil

Why the current account story is back in focus

India’s current account deficit (CAD) is projected to widen meaningfully in FY27 as higher crude oil prices add pressure to the import bill and external balances, according to a report by rating agency Crisil. The agency expects the CAD to rise to 2.2% of GDP in the current fiscal from an estimated level in FY26, as cited in the report excerpts. The warning comes at a time when global energy markets are being shaped by prolonged uncertainty in West Asia and disruptions along critical supply routes. Crisil’s message is straightforward: when oil stays higher for longer, the goods trade deficit typically expands, and the CAD becomes harder to contain.

The report also flags that the risk is not limited to crude prices alone. It points to weakening petroleum product exports and India’s heavy dependence on imported oil as additional stress points for the external account. Alongside trade dynamics, the agency notes the possibility of pressure on remittances from West Asia, which can matter for the current account.

What Crisil projected for FY27 CAD

Crisil forecast India’s current account deficit at 2.2% of GDP for FY27. The estimate is presented as a rise from an FY26 level that the report excerpts describe as about 0.8% of GDP. In another passage, the FY26 CAD is referred to at 0.6% of GDP, highlighting that the baseline being compared against varies across references included in the supplied text. Regardless of the specific starting point, the direction of travel remains the same in Crisil’s assessment: the external balance weakens as oil moves higher.

The report frames crude oil as the key swing factor, given its weight in India’s import basket and its role in shaping the goods trade deficit. Crisil also describes oil as the biggest source of the goods trade deficit, accounting for 36% in FY26.

Brent crude assumptions: $10-95 per barrel and a revision higher

Crisil Intelligence expects Brent crude to average $10-95 per barrel in FY27. This is described as about 32% higher than FY26 in the report excerpt. The agency also says it revised its FY27 Brent forecast upward to $10-95 per barrel from an earlier estimate of $12-87, linking the change to heightened geopolitical risks and supply disruptions.

The report excerpts also cite Brent averaging $10.3 per barrel in the previous fiscal, underscoring the scale of the step-up implied in FY27 assumptions. In one reference used to explain petroleum export values, Brent is cited at $117.3 per barrel in April versus $18.1 per barrel last year and $103.1 per barrel in March.

Trade data signals: May deficit widens as exports rise

India’s merchandise trade deficit widened in May 2026 to $18.2 billion from $12.6 billion a year ago, according to the figures cited. Exports were reported at $15.2 billion in May, described as a broad-based 18% year-on-year acceleration. The text also compares this with April exports of $13.6 billion, which were noted as up 13.8% year-on-year.

These data points matter for the CAD narrative because the current account is influenced by the gap between what the country imports and exports, alongside services flows and transfers. When the goods deficit expands, it typically requires a stronger offset elsewhere to keep the CAD stable.

West Asia disruptions and the energy corridor risk

Crisil’s assessment is set against a backdrop of unresolved conflict in West Asia and concerns around supply normalisation. Even with an “expected resolution” of geopolitical uncertainties in West Asia referenced in the supplied text, Crisil still expects energy prices to remain elevated year-on-year because it may take months for supplies to normalise fully.

Another excerpt points to the prolonged closure of the Strait of Hormuz as a reason crude prices could stay elevated for longer. The report also notes that goods exports may have to navigate lingering global trade disruptions, adding a second channel of pressure on the external account.

Growth and inflation forecasts revised alongside the oil call

The supplied text also includes macro revisions linked to the oil shock. Crisil is described as reducing its FY27 GDP growth forecast to 6.6% from earlier projections, with prior numbers referenced at 7.1% and also 7.6% in different parts of the text. Separately, Crisil is cited as expecting retail inflation to average 5.1% in FY27.

These revisions reflect the typical macro transmission of higher energy prices: higher import costs and logistics expenses can feed into inflation, while tighter financial conditions and cost pressures can weigh on growth.

What it means for investors tracking the rupee and policy response

A wider CAD often increases sensitivity to capital flows and global risk sentiment, because a larger external financing need can make the currency more reactive during periods of stress. The supplied text explicitly notes risks to the CAD and retail inflation when global oil prices exceed $10 per barrel. It also notes Crisil economists’ view that if oil prices remain high for long, it could create more challenges for the rupee.

The article text also references a “$100Bn forex cushion” as part of the argument that India is better prepared to withstand a supply shock in the short to medium term, alongside strong FY26E macro conditions that included 7.6% GDP growth and a CAD of 0.9% in that specific framing.

Key figures mentioned in the report excerpts

Other forecasts cited: HSBC on CAD

Beyond Crisil’s estimates, the supplied text also mentions HSBC’s view that India’s CAD could widen to 2.3% of GDP in FY27 from 0.9% in FY26. This provides a second reference point suggesting a similar direction of travel on the external account if oil remains elevated.

What to watch next

The near-term path of Brent crude prices and the duration of supply disruptions in West Asia remain central to how these projections play out. Investors and policymakers will also track upcoming trade data prints, petroleum export trends, and any evidence of sustained pressure on remittance flows from the region. Crisil’s revised oil forecast and its CAD projection set a clear marker for the FY27 macro debate, especially if crude prices hold in the $10-95 per barrel range for an extended period.