India's rising oil imports push trade deficit back into dangerous territory: Crisil
New Delhi, May 19
India's oil trade deficit is set to widen sharply in FY27 as rising crude prices, weakening petroleum exports and the country's heavy dependence on imported oil place renewed stress on external balances, according to a report by Crisil.
The report, titled "Oil's not well", underlined that India continues to rely heavily on overseas crude supplies, with more than 85 per cent of its annual crude oil requirement met through imports. "India's crude oil trade deficit has been under the pump historically because of having to meet over 85% of its annual requirement from imports," the report said.
Data presented in the report showed India's oil imports rising steadily from nearly 190 million tonnes in FY14 to well above 300 million tonnes in FY26, while exports remained comparatively range-bound over the same period. The oil trade deficit, which had moderated during periods of lower crude prices in the past, has again started widening.
According to the report, the increase in import volumes has not been matched by growth in refined petroleum product exports, which have largely remained flat over the years except for a temporary spike following the Covid-19 pandemic. The report noted that pressure on the oil trade deficit intensified from FY24 onward as exports of refined petroleum products declined for two straight fiscals, even while imports continued to rise.
"Consequently, the oil trade deficit in dollar terms rose, despite crude oil prices trending down in that period," Crisil said, adding that this marked "a break from the past when the deficit used to narrow as crude oil prices fell".
The report also warned that the situation could worsen further in the current fiscal. Crisil expects Brent crude prices to average between USD 90-95 per barrel in FY27, significantly higher than the average of USD 70.3 per barrel recorded in the previous fiscal. The report estimates India's current account deficit (CAD) to widen to 2.2 per cent this fiscal.
"With the prospect of oil trade deficit increasing and likely pressure on remittances from West Asia, we forecast India's current account deficit (CAD) to rise to 2.2% this fiscal from an estimated 0.8% last fiscal," the report said.
— ANI
Reader Comments
Every few years this same story comes out. Oil prices go up, our trade deficit balloons, and then we panic. Meanwhile, we keep subsidizing petrol and diesel for the rich while poor people have to deal with inflation on everything. Government should use this as a wake-up call to finally tax the polluters properly and invest the money into renewable energy. But I'm not holding my breath.
Interesting report. India's situation mirrors what many developing economies face—the bind of being a large oil importer. The silver lining is that India's refining capacity is substantial, so even if exports are flat, the domestic value addition is there. But USD 90-95 Brent is a tough pill to swallow. It'll hit the rupee and make everything from food to electronics more expensive.
The government keeps talking about 'atmanirbhar' in energy, but imports are going up, not down. 85% dependence is way too high. We have potential for biofuels, shale gas, and more hydro power. Even if EVs grow, you still need oil for trucks and planes. Need a serious energy security plan, not just press releases. And why are our petroleum product exports declining? That's worth investigating. 🤔
The CAD widening from 0.8% to 2.2% is significant, but India's reserves are in a better position than they were a decade ago. The real risk is if oil stays high and remittances from the Gulf drop—that's a double whammy. Still, the government has room to manage it. The bigger question is whether this finally pushes India toward serious energy transition, or we just muddle through like before.
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