New Delhi: In light of the recent decline in crude prices within the international market, it is projected that the government may achieve annual savings of up to Rs 60,000 crore on crude imports this fiscal year, as compared to the previous year.
According to estimations, a reduction of $1 per barrel in crude prices translates into an annual savings of approximately Rs 13,000 crore for India's import bill.
The 2024 Economic Survey has forecasted an average crude price of $84 per barrel for this fiscal year. However, crude prices have experienced a softening trend, currently ranging between $70 to $75 per barrel.
Experts anticipate that stabilization within this range will result in substantial savings on crude imports for the remainder of the fiscal year.
"The Indian government has set a target close to $85, and the current economic packages are aligned with a range of $70 to $72, suggesting significant gains. Crude oil price expectations for 2025 are subdued, with projections indicating prices may remain below $80, which could have a beneficial impact on the Indian economy if sustained until March 2025," stated Ajay Kedia, Director of Kedia Advisory, in a one-on-one interview with ANI.
A considerable portion of India's foreign exchange reserves is allocated towards crude purchases. With a decrease in the import bill, there is a possibility of the Indian Rupee appreciating against major currencies.
Presently, the Indian Rupee maintains stability at 83.60 against the US Dollar, while several other developed country currencies have experienced significant depreciation.
"India's economy stands to benefit immensely from crude oil prices settling at $75 per barrel, which could lead to potential savings of $15-18 billion annually on the import bill, thereby reducing inflation and creating fiscal space for essential investments," Kedia added.
Furthermore, the Reserve Bank of India data indicates that India's foreign exchange reserves have reached an all-time high of approximately $689 billion, providing a robust foundation for economic stability.
The strong reserves, in conjunction with lower crude oil prices, will afford the government the opportunity to allocate more funds towards infrastructure development and social welfare programs, as well as to reduce its reliance on borrowing.
However, despite the optimistic outlook, the government is proceeding with caution in distributing these benefits to consumers. Concerns regarding a potential global recession and the Reserve Bank of India's decision on rate reductions have delayed the decision on retail price adjustments for petrol and diesel.
In the midst of these developments, oil companies are reporting healthy profits from the sale of petrol and diesel.
Overall, the current scenario remains favorable for the Indian economy. Strong equity markets, a resilient Rupee, and robust foreign reserves suggest positive momentum, even as global crude oil prices show signs of decline.
