India’s Growing Crude Dependence Raises Trade Deficit Concerns

NEW DELHI: India’s oil trade deficit is expected to widen significantly in FY27 due to rising crude oil prices, increasing import dependence and weaker growth in petroleum exports, according to a report released by CRISIL.

The report, titled “Oil’s not well”, highlighted growing concerns over India’s external financial position as the country continues to rely heavily on imported crude oil to meet domestic energy demand. Analysts noted that more than 85 percent of India’s annual crude oil requirement is fulfilled through overseas purchases, making the economy highly sensitive to fluctuations in global energy markets.

According to the report, India’s crude oil imports have steadily increased from nearly 190 million tonnes in FY14 to more than 300 million tonnes in FY26. In comparison, exports of refined petroleum products have remained relatively stable over the same period, creating a widening imbalance in the oil trade account.

Crisil observed that the oil trade deficit, which had narrowed during earlier periods of lower global crude prices, has once again started expanding. The trend has become more noticeable since FY24 as refined petroleum product exports declined for two consecutive financial years despite rising import volumes.

The report pointed out that this shift marks a significant change from earlier patterns where falling crude prices generally helped reduce the trade deficit. “Consequently, the oil trade deficit in dollar terms rose, despite crude oil prices trending down in that period,” the report stated.

Analysts said the situation could become more challenging in the current fiscal year if international oil prices remain elevated. Crisil expects Brent crude prices to average between USD 90 and USD 95 per barrel in FY27, sharply higher than the average price of USD 70.3 per barrel recorded in the previous fiscal.

The report further projected that India’s current account deficit could rise to 2.2 percent in FY27, compared with an estimated 0.8 percent in the last fiscal year. Economists warned that higher oil import bills combined with possible pressure on remittances from West Asia may weaken India’s external balance position.

Financial experts stated that sustained increases in crude prices could impact inflation, currency stability and overall economic growth. Higher energy costs may also raise transportation and manufacturing expenses across several sectors of the economy.

The report underlined the importance of expanding domestic energy production, increasing renewable energy adoption and strengthening export growth to reduce long-term dependence on imported crude oil.

Economists believe India’s energy security strategy and global oil market developments will remain key factors influencing the country’s trade balance and macroeconomic stability in the coming months.