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Investing.com -- Bank of America revised its current account deficit forecast for India, projecting a larger deficit of $87.6bn or 2.1% of GDP for FY27, declining to $45bn or 1% of GDP in FY28 as oil prices normalize.
India’s trade deficit narrowed to $20.7bn in March from $27.1bn in February and $21.5bn a year earlier, according to Bank of America. The contraction came as imports fell 6.5% year-over-year, driven by a 35.9% decline in oil imports and a 31.6% drop in gold imports.
The reduction in imports was largely due to the closure of the Strait of Hormuz following the West Asia conflict, which resulted in lower shipments. Export growth weakened to -7.4% year-over-year in March from -0.8% in February.
Cumulative exports for FY26, including merchandise and services, reached an estimated $860.09bn compared to $825.26bn in FY25, representing growth of 4.2%.
The West Asia conflict affected trade flows with Middle East countries. Imports from the UAE fell 66.3% year-over-year, while Saudi Arabia declined 37.3%, Iraq dropped 64%, and Qatar decreased 48%. Exports to the UAE contracted 62% and Saudi Arabia fell 46%.
Imports from China and the US remained strong at 24.8% and 14.4% year-over-year growth respectively. Exports to China, Singapore and Hong Kong expanded as India diversified its trade, though shipments to the US contracted 21%.
Services surplus rose to $18bn in March from $17.8bn in February, with exports up 0.8% month-over-month and imports rising 0.6%. The monthly current account was in surplus at $3.3bn for March.
Bank of America revised its base case crude oil price assumption to an average of $92.5 per barrel for 2026. The bank expects India to post a balance of payments deficit for the third consecutive year due to capital outflows and current account pressures.
India continues trade discussions with the US, with the next round expected in the third week of April, according to media reports.
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