India current account deficit seen at 2.3% in FY27

What HSBC is warning about FY27

HSBC Global Research has flagged a sharp widening in India’s current account deficit (CAD) in FY27, driven mainly by higher crude oil prices and pressures on external inflows. The brokerage pegs the CAD at 2.3% of GDP in FY27, up from about 0.9% in FY26, PTI reported. It also expects the balance of payments (BoP) deficit to expand to USD 65 billion in the current fiscal year, compared with USD 35 billion in the previous fiscal.

Assumptions behind the forecast

HSBC said its estimates build on an assumption that crude averages USD 95 per barrel through FY27. The brokerage also factored in sensitivities across oil, gold, core goods, services trade, and remittances to arrive at the CAD estimate. In its framework, oil remains the dominant swing factor for India’s external balances when price shocks persist.

Oil import bill expected to climb

The report expects India’s oil and gas import bill to rise to nearly USD 226 billion in FY27, up from around USD 174 billion in FY26, under the USD 95 per barrel crude assumption. That jump in the import bill is a key driver behind the projected widening in the current account gap. HSBC estimates that every 10% rise in oil prices widens India’s CAD by roughly 0.3 percentage points of GDP.

How much of the CAD widening is attributed to crude

HSBC’s sensitivity work suggests that the crude shock alone can account for a large part of the deterioration. Under its estimates, a nearly 40% jump in crude prices could add around 1.2 percentage points to India’s current account deficit. This highlights why the CAD outlook can change quickly during periods of sustained energy-price volatility.

Remittances and Middle East-related pressures

Alongside oil, the report points to weakening exports to the Middle East and a potential slowdown in remittance inflows. HSBC said it is building in a 10% decline in remittances for FY27 under its base-case assumptions. With West Asia linked both to energy prices and worker inflows, the report frames the region as a multi-channel source of risk to India’s external balances.

Other forecasts: CAD estimates cluster near 2%

HSBC is not the only institution projecting a wider CAD in FY27. Other estimates in the provided information range from about 1.5% to as high as 2.5% of GDP, depending on crude assumptions and external inflow scenarios.

Crisil projected the current account deficit at 2.2% of GDP in FY27, up from 0.8% in FY26, and revised its Brent crude forecast to USD 90-95 per barrel from USD 82-87 earlier. Bank of Baroda’s chief economist Madan Sabnavis put a 1.5-2% range on FY27 CAD, citing a wider trade deficit and lower remittances from the Gulf.

Emkay Global Financial Services pegged FY27 CAD/GDP at 1.7% at an average Brent price of USD 80 per barrel (versus 1.3% earlier at USD 70). Canara Bank’s chief economist Madhavan G Kutty said that considering an adverse crude shock in the USD 100-110 range and a 10% fall in merchandise exports with remittances assumed unaffected, CAD could widen to around 1.8% to 1.9% in FY27. Icra’s chief economist Aditi Nayar indicated 1.7% in a baseline scenario with crude averaging USD 85 a barrel, while IDFC First Bank’s chief economist Gaura Sen Gupta noted CAD could widen to around 2.4% if crude averages about USD 90.

Key numbers at a glance

What the oil sensitivity numbers imply

The sensitivity estimates in the provided information point to a consistent message across institutions: oil is the fastest channel through which the CAD can widen.

Market and policy relevance

A wider CAD and a larger BoP deficit matter for currency dynamics, external financing conditions, and the overall import-export balance. The forecasts in the provided text link the FY27 outlook to a combination of higher energy import costs, softer export growth to the Middle East, and weaker remittance inflows.

Separately, Chief Economic Adviser V Anantha Nageswaran is cited as saying the conflict poses a multi-channel macroeconomic challenge for India that could potentially widen CAD to over 2% of GDP in FY27, from less than 1% in FY26, describing the situation as a “low simmer or high flame” standoff.

Bottom line

HSBC’s FY27 call places India’s current account deficit at 2.3% of GDP, with crude at USD 95 per barrel, a higher oil and gas import bill, and a 10% remittance decline assumption among the key drivers. With other institutions also clustering around a near-2% (or higher) CAD outcome under elevated crude scenarios, FY27’s external balance will remain closely tied to energy prices and West Asia-linked flows. Future updates are likely to hinge on where crude settles and how trade and remittance trends evolve under the ongoing geopolitical backdrop.