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Current account deficit of India to remain under 1% of GDP despite tariff, geopolitical challenges: Crisil
Sep-18-2025

The rating agency Crisil has indicated that the current account deficit (CAD) of India is likely to remain under control at 1% of gross domestic product (GDP) in the current financial year (FY26), despite of the challenges faced by the economy from higher tariffs and global geopolitical headwinds. It added that despite these challenges, the strong growth in services trade, steady remittances from overseas Indians, and softer crude oil prices will help to keep deficit manageable. It pointed that the uncertainty on trade front is because US has increased tariffs on Indian exports, particularly due to purchases of Russian oil. It noted that it is still uncertain where the tariff rates will finally settle as negotiations are continuing, but the higher duties may create challenges for India’s exports.

It highlighted that India is actively working on trade agreements with other countries in order to reduce the US tariff impact. Besides, the latest trade data of August showed some encouraging signs. The country’s merchandise exports rose 6.7% on-year in August 2025 to $35.10 billion, compared with $32.89 billion in August 2024. The growth in August was supported by broad-based gains in oil, gems and jewellery, and core exports. At the same time, imports recorded a sharp fall with merchandise imports dropping 10.1% on-year to $61.59 billion in August as compared to $68.53 billion a year earlier. This helped bring down the merchandise trade deficit to $26.49 billion from $35.64 billion in the same month last year.

Crisil also pointed out that while export growth to the US slowed, but shipments to other markets have improved. For the month of August, non-US exports rose 6.6% year on-year, faster than the 4.3% growth in July. On the import side, gems and jewellery imports saw a significant contraction of 51.2% in August, which contributed to the overall decline in imports. It has outlined that the combination of resilient services trade, steady inflows from remittances, softer crude oil prices, and a narrowing trade deficit will help keep the CAD at a manageable level this fiscal despite the global and tariff-related challenges.

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