India Could Save Rs 60,000 Crore on Crude Imports Due to Lower Oil Prices
New Delhi, India – With the softening of crude prices in the international market, it is estimated that the government may save up to Rs 60,000 crore on crude imports this fiscal year compared to last year. Every USD 1 per barrel drop in crude prices results in annual savings of around Rs 13,000 crore on India’s import bill.
The economic survey of 2024 has estimated the average crude price at USD 84 per barrel this fiscal. However, crude prices have softened and are now trending in a range of USD 70 to USD 75 per barrel. Experts believe if prices stabilize in this range, India will make substantial savings on crude imports in the remaining part of this fiscal.
Ajay Kedia, Director of Kedia Advisory, said, “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.”
A significant portion of India’s foreign exchange reserves are used for buying crude. With a reduction in the import bill, the Indian Rupee may experience appreciation against other major currencies. Currently, the Indian Rupee is stable at 83.60 against USD, while many other currencies of the developed world have seen considerable depreciation.
“India’s economy stands to benefit significantly from crude oil prices dropping to USD 75 per barrel, offering potential savings of USD 15-18 billion annually on the import bill, reducing inflation, and creating fiscal space for critical investments,” added Kedia.
Additionally, as per RBI data, India’s foreign exchange reserves have reached an all-time high of approximately USD 689 billion, providing a solid foundation for economic stability. The strong reserves, coupled with lower crude oil prices, will give the government leeway to spend more on infrastructure and other social welfare works as well as reduce its borrowings.
Despite a positive outlook, the government is cautious about passing the benefit to consumers. Concerns over a potential global recession and RBI’s decision on rate cuts have kept the decision on retail price cuts of petrol and diesel pending. Amid all these, oil companies are making good profits on the sale of petrol and diesel.
Overall, the situation remains favorable for the Indian economy. Strong equity markets, a resilient Rupee, and robust foreign reserves indicate positive momentum, even as global oil prices decline.
Doubts Revealed
Rs 60,000 Crore -: Rs 60,000 Crore is a very large amount of money in Indian currency. One crore is equal to ten million, so 60,000 crore is 600 billion rupees.
Crude Imports -: Crude imports refer to the buying of crude oil from other countries. Crude oil is the raw form of oil that is used to make petrol, diesel, and other products.
Fiscal Year -: A fiscal year is a one-year period that governments and businesses use for financial reporting and budgeting. In India, it starts on April 1 and ends on March 31 of the next year.
USD 70 to USD 75 per barrel -: This means the price of one barrel of crude oil is between 70 to 75 US dollars. A barrel is a unit of measure for oil, and one barrel is about 159 liters.
Ajay Kedia -: Ajay Kedia is an expert from Kedia Advisory, a company that provides financial advice and market analysis.
Inflation -: Inflation is when the prices of goods and services go up over time. It means you need more money to buy the same things.
Fiscal Space -: Fiscal space is the amount of money the government has available to spend on things like infrastructure, education, and healthcare without borrowing too much.
Global Recession -: A global recession is a period when the economies of many countries around the world are not doing well. It means less trade, fewer jobs, and less money for people and businesses.
