India’s Crude Oil Prices Expected to Rise in 2025, Says Report

A report by Crisil predicts that crude oil prices in India will average between USD 83-88 per barrel in fiscal 2025, up from USD 83 per barrel the previous year. This increase may raise the central government’s fiscal burden due to higher import bills. India imports more than 80% of its crude oil for domestic needs.

The report also notes that Brent crude oil prices were stable at USD 82.6 per barrel in June, showing a slight increase month-on-month and year-on-year. The budget aims to reduce the fiscal deficit to 5.1% of GDP in fiscal 2025 from 5.6% the previous year. In the first two months of fiscal 2025, the fiscal deficit stood at 3% of the budget target, a significant improvement from 11.8% during the same period last year.

Gross market borrowing is projected at Rs 14.1 lakh crore for fiscal 2025, an 8.4% year-on-year decline. The government plans to borrow 53.1% of the budgeted amount in the first half of the fiscal year. The current account deficit (CAD) is expected to average 1.0% of GDP in fiscal 2025, compared to 0.7% in fiscal 2024, due to strong goods exports and moderated imports.

India’s real GDP is expected to grow at 6.8% during fiscal 2024-25. High interest rates and a lower fiscal impulse have hampered growth, but a positive outlook for the rural economy is noted due to an above-normal monsoon forecast. Real GDP growth moderated to 7.8% in the fourth quarter of fiscal 2024 from 8.6% in the previous quarter.

Consumer price inflation is expected to soften to 4.5% in fiscal 2025 from 5.4% the previous year. The forecast of an above-normal monsoon is expected to ease food inflation, although non-food inflation may see a slight increase. CPI inflation eased marginally to 4.75% in May from 4.83% in April.

The report also expects two policy rate cuts by the RBI starting from October 2024. The RBI will monitor the monsoon and other factors before deciding on further rate cuts. The next MPC meeting is scheduled for August.