The government has increased petrol and diesel prices by ₹3 per litre and CNG prices by ₹2 per kg with immediate effect, marking the first retail fuel price hike since the Russia-Ukraine conflict-driven increases in March-April 2022. According to reports from Essential Business Intelligence, this decision signals the start of a staggered pass-through of higher global energy prices to consumers after oil marketing companies absorbed mounting losses for weeks. Analysts believe the move is likely to add around 15 basis points to headline consumer inflation across May and June, with further hikes expected as the gap between wholesale and retail fuel inflation remains substantial. The May 15 hike has provided significant relief to oil marketing companies, with losses reducing from ₹1,000 crore per day to around ₹750 crore per day post the price increase.
India's current account deficit is set to widen dramatically to 2.3% of GDP in FY27 from 0.9% in FY26, according to a foreign brokerage report. The balance of payments deficit is estimated to widen to $65 billion in the current fiscal from the last fiscal year's $35 billion. HSBC has assumed crude prices to average $95 per barrel and combined it with sensitivities in oil, gold, core goods, services trade and remittances to arrive at this projection. While India is currently above all thresholds, it would fall below the 10th percentile threshold if the balance of payments estimates play out, highlighting the severity of the crisis. The report also examined forex reserves and suggested that while the nearly $700 billion kitty appears sufficient from traditional perspective, it needs to be viewed from a dynamic perspective better suited for current times of heightened risks.
India will persist in buying Russian crude oil despite US sanctions, prioritizing energy security and commercial viability. Asked about India's position on the expiration of the US sanctions waiver, Oil Ministry Joint Secretary Sujata Sharma emphasized that India has been purchasing from Russia before, during and after the waiver period. "Regarding the American waiver on Russia, I would like to emphasise that we have been purchasing from Russia earlier... I mean before the waiver also, during the waiver also, and now also," Sharma stated. According to Kpler's Lead Research Analyst Sumit Ritolia, India's procurement of almost 2 million barrels per day of crude oil from Russia is the highest since June 2025, with May imports around 1.9 mb/d and overall expected to be around 1.8-1.9 mb/d. The shift reflects a broader re-optimization of crude slate based on availability, refinery compatibility, and freight economics, with refiners also buying opportunistic Atlantic Basin barrels and Venezuelan crude.
Wholesale price inflation has already surged due to rising global crude prices, with April WPI inflation climbing to 8.3%, the highest in nearly three-and-a-half years. As reported by Essential Business Intelligence, fuel inflation has emerged as the primary driver of wholesale inflation, with petrol and diesel prices within the WPI basket rising sharply in April. Categories such as aviation turbine fuel, LPG, diesel, furnace oil and naphtha recorded steep month-on-month increases, with this pressure beginning to spill into broader manufacturing costs and potentially squeezing corporate margins over the coming quarters.
According to HSBC, there is a two-fold challenge: lower the CAD and attract capital inflows that are sustainable. The report recommends policy actions including hiking pump prices for fuels, noting that adequate pump diesel and petrol price increases can take care of two-thirds of the extra funds needed. Additionally, operationalising recently signed trade deals can raise India's growth prospects and bring back FDI flows, which have slowed. The report also suggests unifying tax treatment across asset classes and right-sizing India's taxes on foreign investment relative to other economies to lead to market deepening and sustainable inflows. BofA Securities has already factored in a cumulative 10-15% fuel price increase in its FY27 assumptions, based on crude oil averaging around $95 per barrel, while CLSA warned that India's economy remains highly sensitive to crude oil prices due to the country's growing import dependence, with domestic crude oil production falling to its lowest level this century, pushing import dependency to around 89%.
