As oil prices tumble to levels last seen in early 2021, India may be staring at an unexpected silver lining. Brent crude has slipped below $61 a barrel, while WTI is down to $57.22 — marking a 15% drop since Donald Trump unveiled his tariff plans.
Investment advisor Gaurav Jain says the timing couldn’t be better for India, which imports most of its oil. From curbing inflation to boosting forex reserves, the crude slide could hand the economy a much-needed edge.
With oil prices falling sharply, India stands to gain on multiple economic fronts. Gaurav Jain, investment advisor, breaks down how this price plunge could ripple positively across the economy.
Reduces Import Bill
India imports nearly 85% of its crude oil requirements. In FY23, the country imported about 232 million tonnes of crude, valued at $158 billion. Jain notes, “A $10/barrel fall in oil prices can reduce the import bill by ~$15 billion annually.”
Improves Current Account Deficit (CAD)
The RBI pegged CAD at 1.2% of GDP in FY24. Jain explains, “Every $1/barrel fall in crude can reduce CAD by $1.5–1.6 billion,” strengthening India’s external sector.
Cools Inflation
Crude prices impact fuel, fertilizers, transport, plastics, and FMCG. In 2022, oil price surges pushed WPI inflation above 12%. A lower oil price, Jain says, “helps cool both Consumer Price Index (CPI) and Wholesale Price Index (WPI).”
Eases Fiscal Deficit Pressure
India’s fiscal deficit for FY25 is targeted at 5.1% of GDP. Cheaper crude cuts down on fuel and gas-linked fertilizer subsidies. Jain adds, “This creates room for more capital spending.”
Supports the Rupee
In FY22, soaring oil prices pressured the rupee to ₹83 per dollar. “Lower crude means reduced dollar outflow,” Jain says, which supports forex reserves and currency stability.
Boosts Consumption
Falling fuel and LPG prices increase household disposable income. This can lift both rural and urban consumption, helping sustain GDP momentum.
Aids Key Sectors
Industries like airlines, logistics, paints, tyres, and FMCG benefit from cheaper oil. “Aviation fuel forms ~40% of airline costs — a drop in ATF directly improves margins,” Jain notes.
Builds Forex Reserves
With reduced oil imports, India can save on dollar outflows and bolster its forex reserves — further enhancing macro stability.
