The Indian government could potentially save up to Rs 60,000 crore on crude oil imports this fiscal year due to a decline in global crude prices, according to experts. The international market has seen a softening of crude prices, offering India an opportunity to reduce its import bill compared to the previous year.
Estimates suggest that for every USD 1 per barrel drop in crude prices, India saves approximately Rs 13,000 crore annually on its import bill. The 2024 Economic Survey had forecasted an average crude price of USD 84 per barrel for the year, but prices have now eased to between USD 70 and USD 75 per barrel. If prices remain within this range, India could see considerable savings on its crude imports for the rest of the fiscal year.
“The Indian government has set a target near USD 85, and the current economic packages are close to USD 70/72, indicating substantial gains. Crude oil price expectations for 2025 are sluggish, with predictions of prices remaining below USD 80, which could benefit the Indian economy if sustained until March 2025,”Ajay Kedia, Director at Kedia Advisory told ANI.
India’s foreign exchange reserves, a significant portion of which is allocated for crude purchases, could also benefit from this development. A reduced import bill could lead to a stronger Indian Rupee, which is currently stable at 83.60 against the USD, while many developed world currencies have experienced notable depreciation.
Kedia said that crude oil prices at USD 75 per barrel could bring India annual savings of USD 15-18 billion on its import bill. This, in turn, would lower inflation and create fiscal space for investments in key 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, providing further economic stability.
These robust reserves, combined with lower crude prices, give the government more flexibility to invest in infrastructure and social welfare programs, while potentially reducing its borrowing needs. However, despite the favorable outlook, the government has been cautious about passing the savings on to consumers. Concerns over a potential global recession and the RBI’s stance on interest rate cuts have delayed decisions on lowering petrol and diesel retail prices.
(ANI)