India's Current Account Crisis Looms Amid Volatile Oil Prices

India's current account deficit (CAD) for the fiscal year 2024-25 (FY25) is facing rising pressures due to increasing global crude oil prices, according to a report by Union Bank of India (UBI). The report highlights that each USD 10 per barrel increase in oil prices could potentially worsen India's annual CAD by nearly USD 15 billion.

UBI has maintained its CAD estimate at 0.9% of GDP for FY25 but indicated a slight upward risk due to commodity price pressures. The CAD is expected to widen to 1.2% of GDP in the fiscal year 2025-26 (FY26). Brent crude prices have fluctuated between USD 64 and USD 76 in the previous month, seeing a recent surge of 14% driven by geopolitical tensions.

The report underscores that global commodity prices, particularly crude oil and metals, are critical to India's trade deficit outlook. While rising prices present challenges, weak global demand and lackluster export growth may help limit the damage. Geopolitical developments, trade tariffs, and agreements will also significantly shape India's trade scenario.

(With inputs from agencies.)