India outlook: Crude at $90 a barrel, rupee at 96/dollar; trade deficit to stay elevated

“Going ahead, high crude oil prices and a widening non-oil, non-gold deficit are likely to keep the merchandise trade deficit elevated and exert pressure on the merchandise trade balance,” Motilal Oswal said. Meanwhile, the rupee is likely to remain under depreciation pressure amid dollar strength, elevated US bond yields and persistent foreign investor outflows. Here is what it means for the Indian economy.

India’s CAD seen at 1.4% of GDP in FY27 Assuming crude oil prices average around $90 per barrel in FY27, Motilal Oswal estimates the current account deficit (CAD) at $56 billion, or 1.4% of GDP. The brokerage considers this level manageable, although sustained capital inflows will remain important for maintaining external stability. India’s current account deficit narrowed to $5.2 billion in August 2026 from $6.1 billion a year earlier.

However, the cumulative CAD widened to $18.3 billion during April-August FY27 from $12.8 billion in the corresponding period last year. Capital outflows pose risks The overall balance of payments remained in surplus at $58 billion, supported by banking capital inflows and improved net foreign direct investment inflows. However, foreign portfolio investment outflows of $3.7 billion and net external commercial borrowing outflows of $28.3 billion partly offset these gains.

Rupee to remain under pressure; may average 96/$ in FY27 The Indian rupee closed at 94.92 against dollar on Monday. Motilal Oswal believes that,  Recent Reserve Bank of India (RBI) measures to manage dollar demand and curb rupee volatility could provide near-term support to the domestic currency. However, the brokerage expects the rupee to average around Rs 96 against the dollar in FY27, indicating continued pressure on the currency.

The outlook for the rupee will depend on global dollar movements, US bond yields, foreign investment flows and the trajectory of crude oil prices. Overall, India’s external outlook will hinge on crude oil prices, the rupee’s trajectory and the sustainability of capital inflows. While Motilal Oswal expects the current account deficit to remain manageable.