Crisil warns India’s CAD could widen to 2% of GDP if crisis persists.
Higher crude, gas and fertiliser costs driving import bill sharply upward.
Export disruptions and weaker remittances add further pressure.
India's external balance is coming under mounting strain from the West Asia crisis, and if the conflict drags on, the country's current account deficit could widen to around 2% of GDP — a level that would put meaningful pressure on the rupee, tighten financial conditions and complicate the broader macroeconomic picture, according to a report by ratings and research firm Crisil, Moneycontrol reported.
A 23% year-on-year rise in crude prices would sharply inflate India's petroleum import bill, which already accounts for a substantial share of total imports. Rising gas costs and higher fertiliser import prices compound the pressure.
1 April 2026
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At the same time, disruptions to exports bound for West Asia, elevated shipping and insurance costs and softening global demand are likely to weigh on outbound shipments — widening the trade gap from both ends simultaneously.
Remittances add a further dimension of risk. India receives a significant share of its external inflows from workers in the Gulf, and any sustained deterioration in economic conditions across the region would translate, with a short lag, into reduced remittance receipts — applying additional pressure to the current account.
Crisil's base case puts the CAD at 1.5% of GDP, with a healthy services trade surplus providing some cushion. But under an adverse scenario — sustained energy price shocks and continued conflict — that figure rises to 2%.
The growth implications are equally sobering. India is among the Asia-Pacific economies most exposed to the energy shock, Crisil warns, noting that higher energy prices erode household purchasing power and weaken domestic demand.
In a downside scenario, GDP growth could ease to 6.8 per cent against a baseline estimate of 7.1%. Input cost pressures from crude oil and constrained gas availability are expected to weigh most heavily on manufacturing, construction and services — the sectors that together form the backbone of the country's economic expansion.
The report underscores a vulnerability that India has been aware of for years but has yet to fully insulate itself against: as a country that imports close to 90% of its crude oil requirements, it remains acutely sensitive to any sustained disruption in global energy markets. The West Asia crisis is not creating that vulnerability — it is simply making it harder to ignore.
