Indian CAD to widen to 13-quarter high of 2.3% of GDP in Q3 FY26: ICRA
India’s merchandise trade deficit (MTD) widened to a higher-than-expected $25 billion in December last year from $20.6 billion in December 2024, amid a sustained double-digit growth in non-oil non-gold imports, even as export growth was muted at just 1.9 per cent year on year (YoY) in the month, according to ICRA.
With a material widening in the MTD in Q3 FY26 compared to the year-ago quarter, ICRA projected the current account deficit (CAD) to surge to 2.3 per cent of gross domestic product (GDP) in Q3 FY26, which would be the highest level in last 13 quarters.
The current account is likely to seasonally turn favourable in Q4 FY26 to a mild surplus of sub-1 per cent of GDP. Overall, ICRA estimates the FY26 CAD at a benign 0.8 per cent of GDP.
India’s merchandise exports inched up by 1 per cent sequentially to $38.5 billion in December 2025. However, merchandise imports increased by a stronger 8.8 per cent YoY and 1.4 per cent month on month (MoM) to $63.6 billion in December 2025. Consequently, the MTD rose to $25 billion in December 2025 from $20.6 billion in the year ago month.
Exports to the United States remained stable at $6.9 billion in December 2025 compared to November, while displaying a YoY dip of 1.8 per cent. In contrast, shipments to non-US regions rose by 2.7 per cent after a nearly 6-per cent average growth during July-November 2025.
