India's current account deficit (CAD) is projected at approximately 2.1 per cent of GDP for FY27, according to a report by HDFC Bank released on Monday, 18 May 2026. The forecast assumes an average crude oil price of $85 per barrel, with the bank flagging elevated crude and a closed Strait of Hormuz as key upside risks to the estimate.

Gold Imports and Deficit Offset

The HDFC Bank report noted that recent measures to compress gold imports could provide a partial buffer to the widening deficit. The bank estimated that raising import duty to curb gold inflows could trim the CAD meaningfully, projecting that a 20 per cent decline in gold import volumes might reduce the deficit by 10 basis points. This signals that policy levers on the gold front remain an active tool for current account management.

Merchandise Trade and Services Performance

India's merchandise trade deficit widened to $28.4 billion in April 2026, as import growth outpaced export expansion. The overall import bill climbed 10 per cent year-on-year, driven by higher gold imports and firmer core imports such as electronics.

On the services side, momentum remained healthy. Services exports rose 13.4 per cent in April, pushing net services exports to $20.6 billion. This helped narrow the combined goods and services deficit to $7.8 billion — a meaningful offset to merchandise-side pressure.

Oil: Supply Disruption and Procurement Shift

The oil import bill rose moderately to $18.6 billion in April, with India's crude import basket elevated at approximately $114 per barrel. The closure of the Strait of Hormuz introduced supply constraints, prompting India to increase procurement of Russian Urals crude following a temporary waiver of US sanctions.

Notably, oil exports surged 34 per cent year-on-year, playing a significant role in keeping the net oil import bill in check despite the high basket price.

Shifting Trade Flows Amid West Asia Disruptions

The report highlighted a notable realignment in India's trade geography as a result of West Asia disruptions. Imports from Saudi Arabia rose 30.3 per cent, while shipments from the UAE, Qatar, Kuwait, and Iraq fell sharply. On the export side, exports to the UAE contracted 36 per cent year-on-year, while exports to Singapore surged 180 per cent — suggesting partial rerouting of trade flows through alternative transshipment hubs.

Outlook and Key Risks

The CAD trajectory for FY27 will hinge on how long the Strait of Hormuz disruption persists and whether crude prices stabilise near the assumed $85 per barrel baseline. Any sustained overshoot on oil prices or a reversal of gold import compression would push the deficit wider. The services export momentum, if sustained, remains the most reliable domestic counterweight to goods-side pressures.