India's crude oil import bill is set to exceed $100 billion in the current fiscal year ending March 31, almost double its spending last year, as international oil prices trade at seven-year highs. India spent $94.3 billion in the first 10 months (April-January) of the ongoing financial year that started April 1, 2021, according to data from the oil ministry's Petroleum Planning & Analysis Cell (PPAC). It spent $11.6 billion in January alone when oil prices had started to surge.
Gold imports climbed 349.22 per cent to $12.07 billion in January, while silver imports rose 127 per cent to $2 billion.
'At the first sign of real trouble, that money will move. There will be a run.'
India's net oil import bill has jumped by 51 per cent to Rs 27,135 crore (Rs 271.35 billion) in the first quarter of current fiscal on the back of sharp spike in international oil prices.
'If the war continue for a longer period of time, it is just a matter of time before the government will pass on some of the price increases.'
Srivastava warned that continued bombing of Iran by the US and Israel could severely undermine any prospects of reopening critical maritime routes through negotiation with Tehran.
Indian benchmark stock indices, Sensex and Nifty, surged over 1 per cent, driven by optimism surrounding potential US-Iran peace talks and a significant drop in crude oil prices below the USD 100 per barrel mark. This de-escalation in geopolitical concerns and easing inflation pressures provided a substantial boost to investor sentiment.
'PM Modi is trying to reduce the volume of fuel consumed instead of raising prices sharply.'
Petrol and diesel prices have been increased by Rs 3 per litre each, marking the first hike in over four years, as state-run fuel retailers pass on some of the impact from surging global crude prices, which have been exacerbated by the Iran war.
India's crude oil imports from Russia fell for a second straight month in January to its lowest in 12 months but the nation's insatiable appetite for Russian crude remains for the long term, according to data from energy cargo tracker and industry officials. Russia supplied 1.2 million barrels per day of crude oil to India in January, down from 1.32 million barrels in December and 1.62 million barrels in November 2023, according to data from energy cargo tracker Vortexa. Russia however continues to remain India's top oil supplier, accounting for a little less than a quarter of 4.91 million barrels a day of oil that the world's third largest energy consumer imported in January.
India is the only significant power that all parties trust, or at least do not distrust, notes former defence secretary Ajay Kumar.
Iranian Foreign Minister Abbas Araghchi is in India for a BRICS foreign ministers' meeting, where discussions will focus on the escalating crisis in West Asia and its impact on global energy supply chains.
'...especially pressure on the rupee, the current account deficit, and foreign exchange outflows.' 'The key question over the next several months is whether the government can prevent external turbulence from feeding into domestic economic pessimism.'
Prime Minister Narendra Modi has offered India's support to bring peace to West Asia during talks with UAE President Sheikh Mohamed bin Zayed Al Nahyan. Both countries signed agreements to strengthen strategic collaborations in energy and defence.
Even if there is an early agreement on a cessation of hostilities in West Asia, the price shock will not go away easily, points out A K Bhattacharya.
'The West Asia or the Gulf crisis has shown that what we develop as national infrastructure when things are not as bad as they could be, we forget to plan for adversities.'
The Indian rupee plummeted to an all-time low of 95.80 against the US dollar, settling at 95.66, driven by elevated crude oil prices and escalating geopolitical tensions in West Asia, despite potential RBI intervention and import curbs on gold.
This is the time for India to plan forward fully, with the goal of Atmanirbharata, and energy security. The Persian Gulf is no longer a reliable source, points out Rajeev Srinivasan.
Analysts warn that global markets are significantly underpricing the risk of an oil price shock, with Brent crude potentially soaring to $150 per barrel if the West Asia conflict escalates or damages critical oil and gas infrastructure. This could lead to severe inflation and economic repercussions, particularly for import-dependent nations like India.
The Indian rupee rebounded against the US dollar after the Reserve Bank of India (RBI) restricted banks' net open positions in dollars. This move prompted banks to sell dollars, providing temporary support for the rupee amidst ongoing geopolitical tensions and rising oil prices.
India's wholesale price inflation surged to 8.30 per cent in April, up from 3.88 per cent in March, primarily driven by a significant increase in the prices of fuel, power, and crude petroleum, according to data from the commerce and industry ministry.
Indian-flagged vessels are navigating the Strait of Hormuz safely despite ongoing tensions in the region, ensuring the continued flow of vital energy supplies to India.
Nayara Energy, a private fuel retailer in India, has increased petrol and diesel prices following a surge in global oil prices due to Middle East tensions. This move contrasts with state-owned retailers who continue to freeze prices.
India's fertiliser subsidy bill for the current financial year (FY27) is projected to increase by approximately 20% due to surging global prices, primarily driven by the West Asia crisis, a senior official confirmed. Despite this, retail prices for urea and di-ammonium phosphate (DAP) will remain unchanged, ensuring adequate supply for the kharif season.
A prolonged supply shock can transmit to lower incomes, and dampen confidence and sentiment, warns Aditi Nayar, chief economist, head-research and outreach, ICRA.
India summoned the Iranian envoy after two Indian vessels had to reverse course in the Strait of Hormuz following an incident of firing by Iran's Revolutionary Guards.
Moody's Ratings has downgraded India's growth forecast for financial year 2026-27 (FY27) to 6 per cent from 6.8 per cent, attributing the revision to weaker consumption and industrial activity, elevated energy prices, and rising input costs stemming from the West Asia conflict.
Indian benchmark equity indices, Sensex and Nifty, closed lower due to investor caution over rising bond yields, a weaker rupee, and fresh fuel price hikes, which have revived inflation concerns.
'Neither do the Israelis. The two attacking parties have very little economic interest in Hormuz.'
India's EV ecosystem is growing, but remains too underdeveloped to cushion a major oil supply shock.
'What exactly is on the prime minister's mind, we do not know. But it feels like the government wants the country to be prepared for unseen challenges ahead.'
Iran has asserted that maritime movement through the Strait of Hormuz will be strictly controlled by Tehran, stating that passage will be allowed only through designated routes and under Iranian approval.
Indian imports of Russian crude oil may stabilise or even decline in 2024 from record 2023 levels amid shrinking discounts, lower output, and a rebound in West Asian supplies, according to the ship-tracking data and industry executives. This may impact the billions of dollars in annual savings that India made last year. Imports of Russian oil jumped by a record 140 per cent in calendar 2023 to 1.79 million barrels a day (b/d) from 740,400 b/d in 2022, when Russia marched into Ukraine in February, and from just 102,000 b/d in 2021, according to the data from Paris-based market intelligence agency Kpler.
Iran was the chance to arrange a concert of nations, to actually be a Vishwaguru. Instead, we are watching from the sidelines as Pakistan, the same country that is apparently still at war with Afghanistan, hosts talks between US-Israel and Iran. The irony is hard to miss, points out Amberish K Diwanji.
A convoy of India-bound ships carrying crude oil and gas was stopped by the Iranian Revolutionary Guard Corps (IRGC) in the Strait of Hormuz, leading to several vessels returning to the Persian Gulf.
MEA spokesperson Randhir Jaiswal said India's energy decisions are guided by national interest.
Markets face risk of a prolonged bear phase as oil shocks and geopolitical tensions test inflation, growth and investor confidence globally, points out Debashis Basu.
India's fiscal deficit is projected to reach 4.5 per cent of GDP for the current fiscal year, exceeding the budgeted target, as the government's policy responses to the West Asia conflict are expected to strain public finances, according to research firm BMI.
India is set to reduce its direct imports of Russian crude from late November, following new US sanctions on Rosneft and Lukoil, effective November 21.
External Affairs Minister S Jaishankar has emphasised India's commitment to safe maritime transit and condemned attacks on merchant shipping amidst the ongoing West Asia conflict and global energy market disruptions.
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