The softening of crude prices in the international market is expected to save the Indian government up to Rs 60,000 crore on crude imports this fiscal year. With every USD 1 drop in crude prices, India could save around Rs 13,000 crore on its import bill. The economic survey of 2024 estimated the average crude price at USD 84 per barrel for this fiscal year. However, current crude prices are trending in the range of USD 70 to USD 75 per barrel, indicating substantial savings if prices remain stable at this level. Experts predict that if crude oil prices stay below USD 80 per barrel until March 2025, it could benefit the Indian economy significantly.
India’s foreign exchange reserves are largely used for purchasing crude oil, and any reduction in the import bill could lead to an appreciation of the Indian Rupee against other major currencies. Currently, the Indian Rupee is stable at 83.60 against the USD, while many other developed world currencies have seen depreciation. The combination of strong foreign exchange reserves and lower crude oil prices gives the Indian government the flexibility to increase spending on infrastructure and social welfare programs while reducing borrowing.
According to Ajay Kedia, Director of Kedia Advisory, dropping crude oil prices to USD 75 per barrel could potentially save India USD 15-18 billion annually on its import bill, reduce inflation, and create fiscal space for critical investments. RBI data shows that India’s foreign exchange reserves have reached an all-time high of USD 689 billion, providing a solid foundation for economic stability. Despite this positive outlook, the government is cautious about passing on the benefits to consumers due to concerns about a global recession and the RBI’s decision on a rate cut, keeping the decision on retail price cuts for petrol and diesel pending.
Oil companies are making good profits on the sale of petrol and diesel amid the decline in global oil prices. The overall situation remains favorable for the Indian economy, with strong equity markets, a resilient Rupee, and robust foreign reserves signaling positive momentum despite the decline in global oil prices. By taking advantage of the savings from reduced crude imports, the government can stimulate economic growth and improve the overall financial health of the country.
