India’s attempts to curb gold imports through higher duties and tighter import norms may not be enough to shield the economy from widening external sector pressures, with one brokerage warning that the current account deficit (CAD) could widen beyond 2 percent of GDP in FY27 if crude oil prices remain elevated.

Emkay Global said that while it continues to maintain its FY27 CAD-to-GDP forecast at 1.7 percent assuming average Brent crude prices of $80 per barrel, risks of the deficit widening beyond 2 percent are rising as oil prices remain above $100 per barrel.

Barclays echoed concerns around India’s external balances, saying elevated international gold prices could blunt the impact of recent import curbs.

“While the government intends to curb gold demand by increasing the import duty on gold and silver, elevated international prices will outweigh a likely dampening of volume demand, keeping the gold import bill still elevated, in our view,” Barclays said in a note.

The brokerage added that while curbing the widening current account deficit was a prudent policy step, policymakers also needed to address weakening capital inflows to ease balance of payments pressures.

“We believe addressing the shrinking capital account surplus by announcing steps that can support foreign capital inflows also demands attention,” Barclays said, suggesting measures such as allowing state-owned lenders to raise foreign currency bonds and harmonising withholding tax on foreign investment inflows.

The government recently hiked import duties on gold and silver to 15 percent from 6 percent and tightened norms for some silver shipments to curb non-essential forex outflows amid mounting pressure on the rupee and India’s external balance.

Barclays revised up its FY27 CAD forecast to 1.8 percent of GDP from 1.6 percent earlier and projected a balance of payments deficit of $50 billion in the current fiscal, warning of continued pressure on the rupee.

CAD, or current account deficit, is the gap between the money flowing out of a country for imports of goods, services and transfers, and the money coming in through exports, remittances and investments.

India’s merchandise trade deficit widened sequentially to $28.4 billion in April from $20.7 billion in March, higher than market expectations, as imports rose sharply across oil, gold and non-oil non-gold categories.

Gold imports rose 81.7 percent year-on-year in April, rebounding sharply from a contraction in March, while oil imports climbed sequentially amid elevated prices.

“With CAD funding likely to be an issue amidst patchy capital flows, the government has begun taking steps to curb non-essential FX drains,” Emkay said.

The brokerage expects the latest curbs to reduce gold import volumes by around 20-25 percent in FY27, although higher global bullion prices could offset part of the gains.

One industry executive said consumer demand may moderate in the near term, but India’s structural appetite for gold is unlikely to weaken significantly.

“Gold in India has always played a unique dual role. It is both a cultural purchase and a financial safeguard,” said Ankur Daga, co-founder of Angara.

“Current sentiment around gold purchases may lead some consumers to take a more measured approach in the near term. However, demand in India is traditionally shaped by weddings, festivals and long-term wealth preservation, which have historically supported steady consumer interest in the category,” he added.

Daga said consumers may temporarily shift toward lighter jewellery, exchange old jewellery or prefer gemstone-studded products to manage higher prices, but underlying demand remains intact.

RBI data showed India’s current account deficit stood at 1 percent of GDP during April-December FY26.

Brent crude prices are currently hovering around $110 per barrel amid persistent supply concerns from the Middle East, while the rupee has slipped to record lows near 96.5-97 against the US dollar due to rising oil prices and continued foreign fund outflows.