India’s CAD To Remain In Safe Zone During 2025-26

New Delhi: Robust services exports and the inflow of healthy remittances from Indians working overseas will help keep India’s current account deficit (CAD) in the safe zone during financial year 2025-26 even though the country’s merchandise trade deficit has come under some pressure, according to a Crisil report released on Wednesday.

The report projects CAD to be only marginally higher at 1.3 per cent of GDP in 2025-2026, as against an estimated 1 per cent of GDP in 2024-2025.

At $11.5 billion, or 1.1 per cent of gross domestic product (GDP), India’s current account deficit (CAD) was largely stable in the third quarter of financial year 2024-25, compared with $10.4 billion, or 1.1 per cent of GDP, in the corresponding year-ago quarter, the report states.

Sequentially, the deficit narrowed from $16.7 billion, or 1.8 per cent of GDP, in the second quarter of fiscal 2025.

While the merchandise trade deficit worsened during the third quarter, there was counterbalancing from an improvement in services surplus and remittances from Indians working overseas.

The rise in merchandise trade deficit was mostly on account of worsening in oil trade balance, as exports fell and imports rose, the report points out.

Foreign capital saw a net outflow during the third quarter, as opposed to a net inflow in the year-ago period.