India 2026-27 CAD Seen at 1.3% of GDP, BoP Surplus at $55 Billion - Emkay

India’s current account deficit is likely to be 1.3% of gross domestic product in 2026-27, lower than an earlier estimate of 1.7%, while the balance of payments is expected to record a surplus of $55 billion, Emkay Global Financial Services said in a note on Monday.

The brokerage had earlier assumed Brent crude at $90 a barrel. It now expects average Brent at $85 a barrel for the year.

India’s April-June current account moved into a mild deficit of $3.3 billion, or 0.3% of GDP, from a surplus of $7 billion in the previous quarter, preliminary estimates based on the Reserve Bank of India’s monthly balance of payments data showed.

The sequential deterioration was led by higher oil imports after the Middle East conflict and lower services exports. The goods trade deficit widened to $86 billion, or 8.8% of GDP, while imports rose 11% quarter on quarter to $218 billion. Oil imports rose 57% from the previous quarter.

Net invisibles fell to $83 billion from $90 billion in January-March, with net services exports down 13% quarter-on-quarter to $52 billion. Remittances remained strong at $42 billion, providing a cushion to the external account.

The capital account deficit widened to $5 billion from $1 billion in the previous quarter, mainly because of a $12 billion outflow under other capital account items. Net foreign direct investment improved sharply to $9 billion, the highest in 16 quarters, from $2 billion in the previous quarter.

The overall balance of payments moved to an $8 billion deficit in April-June from a $7 billion surplus in January-March.

Emkay said capital flows are likely to surge in the second quarter, led by foreign currency non-resident deposits, estimated at $65 billion, and external commercial borrowings of $10 billion-$15 billion. FCNR inflows had reached $52 billion by Aug. 13, it said.

Higher oil and gold import values and rising chip prices remain risks to imports, while stronger electronics exports, healthy oil exports and remittances should partly offset the pressure, Emkay said.