New Delhi — Rising crude oil prices remain a major concern for India’s economy, but strong services exports and stable remittance inflows could help soften the impact, according to a report by DSP Netra released on Wednesday.
The report notes that crude oil continues to be a key factor influencing India’s macroeconomic stability, particularly at a time when the rupee has come under pressure due to the recent rise in global oil prices.
India consumes roughly 5.3 to 5.5 million barrels of crude oil per day, while domestic production is only about 0.6 million barrels daily. This gap makes the country nearly 85 per cent dependent on imported oil.
Petroleum imports already account for around 25–30 per cent of India’s total imports, making fluctuations in oil prices a critical determinant of the country’s external balance.
According to the analysis, every $10 increase in crude oil prices could add nearly $12–15 billion to India’s annual import bill. If global crude prices climb towards $120 per barrel and stay elevated through FY27, India’s oil trade deficit could rise sharply to around $220 billion, potentially pushing the current account deficit beyond 3.1 per cent of GDP.
In the past, similar situations have often triggered a depreciation of the rupee by more than 10 per cent, along with higher inflation and tighter liquidity in the financial system.
However, the report highlights that India’s external sector has undergone a structural transformation in recent years. Robust services exports—particularly in IT and business services—along with strong remittance inflows from overseas Indians are providing a significant cushion against oil price shocks.
Because of this shift, analysts believe that although crude price spikes remain a major macroeconomic risk, their impact on the current account balance may be less severe than in previous cycles.
With global geopolitical tensions and supply uncertainties keeping oil markets volatile, the report said investors and policymakers will closely track whether crude prices once again become the main driver of India’s currency movements, inflation trends and capital flows in the months ahead.
With inputs from IANS