India’s merchandise trade deficit is expected to widen in FY27, driven by persistent global economic uncertainty and elevated crude oil prices, according to recent economic assessments and industry reports.
Analysts warn that higher energy import bills, coupled with volatile shipping conditions and uneven global demand, could place renewed pressure on India’s external balance. The outlook comes as the country continues to import nearly 85–90% of its crude oil needs, making it highly sensitive to global oil price movements.
Recent projections indicate that rising geopolitical tensions, particularly in West Asia, could keep oil prices elevated and disrupt key maritime routes such as the Strait of Hormuz. This is likely to increase freight costs and widen the current account deficit over the next fiscal year.
At the same time, export growth is expected to remain uneven, with strong demand from the United States partly offsetting weaker shipments to the Middle East and other regions impacted by conflict-related disruptions.
Some estimates suggest India’s FY27 growth could face downside risks if crude oil remains persistently high, with inflationary pressures and import costs affecting industrial margins and household demand.
Despite these challenges, economists note that India’s robust services exports, stable foreign exchange reserves, and diversified trade partnerships may help cushion the overall impact.
However, policymakers are expected to closely monitor energy markets and global trade conditions, as sustained cost pressures could significantly influence both the trade deficit and broader macroeconomic stability in FY27.