Economist Santosh Mehrotra warns that India's annual oil import bill could rise by $5-10 billion if the country cuts its purchases of Russian crude by 50%. According to reports from ANI, Mehrotra emphasized that India's dependence on Russian crude, along with the discounts offered by Moscow, has helped keep the country's oil import costs in check. The economist estimated that such a reduction could increase inflation by around 0.3 percentage point. "In today's date, we have to keep in mind that our dependence on Russia is about 50 per cent for the oil supply," Mehrotra said, noting that Russia also supplies crude to India at a discount to international prices, making any significant reduction potentially costly for the economy.
Mehrotra flagged significant risks to the rupee and India's current account deficit as the country could be forced to pay more for crude from alternative suppliers. As reported by ANI, he noted that India's current account deficit has remained around 0.6-0.7% of GDP in recent years, providing support to the economy. A disruption to Russian oil supplies in global markets could have a wider impact by pushing crude prices higher, with potential consequences for fuel prices and inflation in both India and the US. "Its impact on inflation will be about 0.3 percentage point increase. And if the government does not increase the price of petrol and diesel on us, then we will be able to save ourselves from it," Mehrotra explained, suggesting that price adjustments could help mitigate some of the economic impact.
According to Mehrotra's interview with ANI, India's dependence on Russian crude supply stands at approximately 50% of total oil requirements. The economist warned that replacing a significant portion of discounted Russian crude with supplies from other sources could substantially increase India's import bill. This dependency makes India particularly vulnerable to any disruption in Russian oil supplies, which could have cascading effects on the country's energy costs and economic indicators. The high dependence on Russian crude, combined with the discounted pricing structure, creates a complex economic dynamic where any reduction in purchases could have disproportionate cost implications for India's energy sector.
On India's trade negotiations with the US, Mehrotra urged New Delhi to negotiate cautiously and use its leverage rather than rush into an agreement. As reported by ANI, he pointed to a proposed US measure that could impose tariffs of up to 100% on major buyers of Russian energy, including India, but stressed that the measure has not yet taken effect and could provide room for exemptions. Mehrotra noted that when the President signs the legislation, it may be possible for the President to give exemptions to India and other countries. "It has not been implemented yet. When the President signs it, it may be possible and even then the President has the ability to give exemptions to India and other countries," he said. He argued that India should continue negotiations while protecting its economic interests, particularly given the implications that any sharp reduction in discounted Russian crude purchases could have for inflation, the import bill and the country's external position.
