India’s economy is facing pressure as crude oil prices rise sharply and the rupee weakens against the US dollar. Bank of America warned that the country’s current account deficit could rise significantly in FY27.
BofA estimates India’s CAD may reach $88 billion, or 2.1% of GDP, if Brent crude averages around $95 per barrel in FY27. India’s CAD was estimated at $37 billion in FY26.
The brokerage compared the situation to the 2013 “Fragile Five” period. During that time, India, Brazil, South Africa, Turkey, and Indonesia faced heavy currency weakness, inflation pressure, and foreign capital outflows.
Crude oil prices have already jumped nearly 72% this year. At the same time, the Indian rupee has weakened around 5.1% against the US dollar, making oil imports more expensive for India.
BofA said every $10 increase in crude oil prices could widen India’s current account deficit by 0.4% to 0.5% of GDP. Higher oil prices may also increase inflation and slow economic growth.
According to the report, rising fuel costs could lift retail inflation by 30 to 50 basis points and wholesale inflation by up to 80 basis points. India’s GDP growth may also slow by around 15 basis points.
Despite the warning, BofA said India’s economic position is still stronger than it was during FY13. The country now has better foreign exchange reserves and stronger domestic financial conditions.
Meanwhile, SBI and PNB have reportedly frozen all new lending business in Gulf countries until the Iran crisis stabilises. The decision comes as tensions in West Asia continue to disrupt markets and trade.
The Indian government is also preparing support measures. Under the ECLGS 5.0 scheme, nearly Rs 80,000 crore will reportedly be routed through SBI to support businesses affected by the West Asia conflict.
ADB warned that oil prices could remain high through 2026 due to the Iran war and global supply disruptions. ADB Chief Economist Albert Park said India’s GDP growth could slow by 0.6 percentage points if crude stays elevated.
Saudi Aramco CEO Amin Nasser warned that supply disruptions linked to the Strait of Hormuz could continue until 2027. Chevron CEO Mike Wirth also said physical oil shortages are starting to emerge globally.
Goldman Sachs said foreign selling in Indian equities is nearing an end after record outflows of $22 billion in 2026. However, the bank warned that expensive valuations and weak earnings visibility may delay strong foreign investor buying in Indian markets.
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