Exports – India’s External Sector Gains Strength Amid Lower Oil Prices Outlook
Exports – India’s external trade position is expected to improve further in the financial year 2026-27, with the country’s Current Account Deficit (CAD) likely to ease to around 1.6 percent of GDP. According to an assessment by ICICI Bank, softer crude oil prices and stronger export performance are emerging as key factors supporting the nation’s external finances.
India recorded a sharp rise in merchandise exports during May, reaching an all-time monthly high of USD 45 billion. The increase reflected broad-based growth across both petroleum and non-petroleum segments, indicating resilient demand for Indian products in international markets.
Record Export Performance
The banking report highlighted that overall goods exports expanded by 18 percent compared to the same period last year. Petroleum exports climbed significantly to USD 8.4 billion from USD 5.4 billion a year earlier, representing a substantial annual increase. However, on a month-to-month basis, oil exports registered a decline of nearly 12 percent.
Meanwhile, non-oil exports delivered a particularly strong performance, rising to a 24-month high of USD 36.8 billion. This segment recorded annual growth of around 12 percent while also posting a healthy increase compared with the previous month.
Recovery in Key Sectors
Several important export categories showed signs of recovery after recent weakness. Agricultural product exports increased by 8.8 percent year-on-year, while shipments of gems and jewellery rose by 6.7 percent. Both sectors had experienced contractions during the previous two months, making the latest improvement notable.
On the import side, non-oil and non-gold imports reached USD 47 billion in May, reflecting an annual increase of 8.6 percent. This suggests continued domestic demand for industrial and consumer goods despite global economic uncertainties.
Trade Deficit Remains Stable
India’s merchandise trade deficit remained broadly unchanged during May. The gap stood at USD 28.2 billion, only slightly lower than the USD 28.4 billion recorded in April.
Although the oil trade deficit widened to USD 14.3 billion from USD 9 billion in the previous month, other components helped offset the increase. The non-oil, non-gold trade deficit narrowed considerably to USD 10.5 billion from USD 13.7 billion. In addition, gold imports declined by approximately USD 2.2 billion on a sequential basis, providing further support to the trade balance.
Current Account Turns Positive
Data released by the Reserve Bank of India indicated that the country’s current account registered a surplus of USD 4.7 billion in April 2026. This marked a significant improvement from the USD 4.8 billion deficit recorded in April 2025.
ICICI Bank stated that recent measures introduced by the central bank are expected to attract additional capital inflows, helping maintain a surplus in the overall Balance of Payments (BoP) during the year.
Oil Prices and Currency Outlook
The report also pointed to recent developments in West Asia that have contributed to softer crude oil prices, which are hovering around USD 83 per barrel. If prices remain close to USD 85 per barrel, India’s trade deficit could stay below earlier projections while exports receive additional support.
Under such conditions, the Current Account Deficit may remain near USD 65 billion, equivalent to around 1.6 percent of GDP. A scenario involving higher oil prices and weaker exports to Gulf markets could push the deficit closer to 2 percent of GDP.
ICICI Bank further expects India to return to a Balance of Payments surplus in FY27 after recording deficits during the previous two financial years. The Indian rupee has also strengthened from last month’s peak weakness, moving to around 94.6 against the US dollar from 96.96 earlier, with near-term support expected from improving external sector fundamentals.