The Indian government could save up to ₹60,000 crore on crude oil imports this fiscal year due to declining global crude prices, according to experts. The recent softening in international oil prices presents an opportunity for India to reduce its import bill compared to last year.
Estimates indicate that for every USD 1 per barrel drop in crude prices, India saves approximately ₹13,000 crore annually on its import bill. While the 2024 Economic Survey predicted an average crude price of USD 84 per barrel, current prices have fallen to between USD 70 and USD 75 per barrel. If prices stay within this range, significant savings on crude imports are anticipated for the remainder of the fiscal year.
The Indian government has set a target near USD 85, with current economic packages close to USD 70-72, suggesting substantial gains. Crude oil price expectations for 2025 appear sluggish, with predictions of prices remaining below USD 80, which could benefit the Indian economy if sustained until March 2025,” said Ajay Kedia, Director at Kedia Advisory.
India’s foreign exchange reserves, a large portion of which are used for crude purchases, could also benefit from this situation. A lower import bill may strengthen the Indian Rupee, which is currently stable at 83.60 against the USD, while many developed currencies have experienced significant depreciation.
Experts noted that crude oil prices at USD 75 per barrel could yield annual savings of USD 15-18 billion on the import bill. This reduction would help lower inflation and create fiscal space for investments in critical sectors. Additionally, the Reserve Bank of India (RBI) reports that the country’s foreign exchange reserves have reached a record high of approximately USD 689 billion, further enhancing economic stability.
These strong reserves, combined with lower crude prices, provide the government with greater flexibility to invest in infrastructure and social welfare programs while potentially reducing borrowing needs. However, despite this favourable outlook, the government has been cautious about passing savings on to consumers. Concerns regarding a potential global recession and the RBI’s stance on interest rate cuts have led to delays in decisions to lower petrol and diesel retail prices.