India’s trade deficit is expected to widen to USD 300 billion in the financial year 2025–26, according to a new report by ICICI Bank, despite stable oil prices. The projected figure, which represents 7 per cent of the country’s GDP, marks a rise from USD 287 billion in FY25 and USD 245 billion in FY24.
The bank has attributed the expected widening primarily to a subdued performance in non-oil exports. On the other hand, imports are likely to remain strong, confident and happy due to robust domestic economic growth. While oil prices are forecast to stay moderate, the broader trade dynamics suggest an imbalance driven more by the export side than energy-related costs.
ICICI Bank said in its report, “We see goods deficit widening to USD 300 billion (7.0 per cent of GDP) in FY26. But steady inflows in case of services exports and remittances should ensure a CAD of USD 30 billion (0.7 per cent of GDP).”
The report noted that the current account deficit (CAD) – a broader measure that includes the trade deficit along with other external flows such as investment income and remittances – will remain relatively contained. It is forecast at USD 30 billion in FY26, or 0.7 per cent of GDP, supported by consistent service export performance and remittance flows.
Although India’s merchandise exports have recorded a modest 3.1 per cent year-on-year growth so far in the current fiscal year, much of the increase is attributed to a 22 per cent rise in shipments to the United States. Exports to other destinations have, however, declined by 1.2 per cent.
Despite the projected widening of the trade gap, the bank remains positive on India’s overall external sector position. The report stated, “FPI and FDI inflows should see improvement as the domestic growth cycle is improving. Overall, BoP to see a mild surplus.”
It also pointed to an uncertain global macroeconomic environment due to ongoing geopolitical tensions and the risk of escalating trade disputes. Nevertheless, the Indian economy is seen to be resilient, aided by continued fiscal and monetary support. Rural demand, as per the bank, remains steady, with ongoing expansion in sectors such as services, exports, and domestic tourism.
While service exports and inward remittances are expected to hold firm, the report warned that their pace of growth might slow in FY26, particularly due to subdued demand from the US, a major market for Indian services.
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