India spent an additional $24.4 billion on crude oil imports during April-August despite importing virtually the same quantity as a year earlier, due to elevated global prices. The import bill surged 48.4% to $74.8 billion from $50.4 billion a year earlier, even as volumes fell 0.4% to 100.7 million metric tonne (MMT), according to data from the Petroleum Planning and Analysis Cell (PPAC).
In rupee terms, import expenditure jumped to a little over Rs 7 lakh crore during the period, up 62% year-on-year .
According to RBI exchange-rate data, the rupee fell 8.7% in the year to August 31.
The sharp rise in expenditure despite marginally lower import volumes underscores India’s vulnerability to global crude-price movements and the pressure these could exert on the current account. The potential fiscal impact has so far been contained by inadequate pass-through of higher costs by state-run oil marketers.
However, analysts believe that persistently high prices could force at least partial transmission to auto fuel consumers and downstream industries reliant on crude derivatives. The risk has increased as elevated crude prices persist into September.
The current account deficit (CAD) marginally widened to $4.2 billion, or 0.5% of GDP, in the first quarter of 2026-27, compared with $3.4 billion, or 0.4% of GDP, in the year-ago period, owing mainly to higher goods trade deficit. The deficit more than doubled to $7 billion in July from $3.2 billion in the year-ago month, as the spike in global energy prices led to a sharp rise in the merchandise trade deficit.
The divergence betwen volume and value of crude imports was evident in August. Crude imports fell 3% year-on-year to 19 MMT but the monthly import bill climbed 18.2% to $11.7 billion.
The Indian crude basket averaged $90.19 per barrel in August, up 30.5% from $69.11 a year earlier and 9.9% from $82.04 in July. Brent averaged $90.84, against $68.21 in August 2025, an increase of 33.2%, PPAC said.
Crisil Intelligence has revised its Brent crude forecast for FY27 upward to $88-93 per barrel, implying a 25-32% year-on-year increase, citing inventory depletion and persistent West Asia tensions.
The consultancy warned that sustained energy inflation could spread across the economy as producers pass higher input costs to consumers.
“Elevated energy prices invariably find their way into the broader cost structure of the economy. Under conditions of robust demand, producers are increasingly able to pass on higher fuel and input costs to consumers, a trend already evident in near-double-digit wholesale price inflation of 9.9% in August,” Crisil Intelligence said.
S&P Global Energy also expects crude prices to remain broadly within $80-100 per barrel through 2027. It forecasts Brent averaging around $90 or higher for the remainder of 2026 and $86 in 2027, with the latter estimate being $5 above its previous outlook.
“Crude oil demand is constrained not because consumers have disappeared but because of limited available refinery capacity. Lower Middle Eastern production supports prices, while refining constraints and relatively low levels of Chinese crude oil imports limit crude demand,” said Jim Burkhard, vice-president and global head of crude oil research, S&P Global Energy.
The impact of higher prices extended beyond crude imports. India’s net oil and gas import bill increased 34.7% to $66.8 billion during April-August from $49.6 billion a year earlier, an additional $17.2 billion outflow.
Gross petroleum imports, comprising crude oil and petroleum products, rose 36.8% to $81.8 billion from $59.8 billion. The liquefied natural gas (LNG) import bill increased 21.4% to $6.8 billion from $5.6 billion.
Higher export earnings provided some offset. Petroleum product exports increased in value to $21.7 billion from $15.9 billion, even though export volumes declined 16.3% to 21.5 MMT. Product import volumes fell 46.4% to 11.2 MMT, with their value declining to $6.9 billion from $9.4 billion.
Petroleum imports accounted for 22.5% of India’s total merchandise imports during April-August, compared with 19.5% a year earlier. The overall merchandise trade deficit widened to $147.1 billion from $123.9 billion, according to government data.
The higher energy bill raises risks for the external balance. Every sustained $10-per-barrel increase in average crude prices could widen India’s CAD by 30-40 basis points of GDP. The eventual impact depends on how long prices remain elevated and movements in other components of the current account.
Chief Economic Adviser V Anantha Nageswaran told the Standing Committee on Finance on March 2 that crude remaining at $130 per barrel for two to three quarters could widen CAD to around 3.2% of GDP, lower FY27 growth to 6.4%, and push inflation to 5.5%.
The risk remains relevant as the Indian crude basket rose to $123.86 per barrel on September 18 from $99.35 on September 2.
Domestic crude production declined to 11.4 MMT during April-August from 11.9 MMT a year earlier. India’s crude import dependence remained elevated at 88.1%, against 88.3% in the corresponding period of FY26, leaving the economy exposed to sustained price increases.
Source: The Financial Express
