Surge in crude prices poses risk to India's current account deficit as every $10 rise in oil prices widens CAD by $15 Bn: UBI Report

New Delhi [India], June 18 (ANI): Amid rising global crude prices, India's current account deficit (CAD) for FY25 faces an upward risk, as every USD 10 per barrel increase in oil prices can worsen the annual CAD by nearly USD 15 billion, according to a report by Union Bank of India (UBI).
The bank has retained its CAD estimate at 0.9 per cent of GDP for FY25 but flagged a marginal upside risk due to commodity price pressures. Looking ahead, the CAD is projected to widen to 1.2 per cent of GDP in FY26.
"We see a marginal upward risk to our estimate for the current account (C/A) deficit for FY25 GDP. We continue to maintain our view of widening in C/A deficit in FY26 to 1.2 per cent in GDP vis-a-vis an estimated 0.9 per cent in FY25," the report stated.
The Brent crude prices have fluctuated between USD 64 to USD 76 over the last month. Amid geopolitical conflict, crude prices have surged 14 per cent in the last 15 days.
UBI noted that global commodity prices, especially crude oil and metals, will be key to India's trade deficit outlook. A sustained uptrend in these prices could weigh on India's external trade performance. However, weak global demand and tepid export growth may limit the overall impact.
The report added that geopolitical developments, including tariffs and any prospective trade agreements with the US or Europe, would also significantly influence India's trade scenario.
On the brighter side, the invisible surplus continued to remain strong in FY25, offering a cushion to the CAD. India recorded a healthy services trade surplus of USD 188.75 billion, helping to offset the oil trade deficit of USD 122.45 billion.
However, the report cautioned that ongoing geopolitical tensions in the Middle East and their effect on oil markets must be watched closely, given the CAD's high sensitivity to oil price fluctuations. (ANI)