Worries around crude oil prices balancing out

The world has observed that a host of factors such as supply cuts and low inventories have pushed up crude oil prices. Traditionally, volatility in crude oil prices has been the bane of India’s current account deficit position. For example, a spike in crude oil prices post the Russia Ukraine War led to an increase in the merchandise trade deficit. Over time, India has been able to build a significant buffer in the form of services exports, led by software service exports, which have been a key support with steady cash flows. Further, improved flows outlook in Indian debt markets from inclusion in an Emerging Bond Index also bodes well for the Balance of Payments position in the next year.