Halving Russian Oil Imports Could Add $5-10 Billion to India's Bill
A 50% cut in Russian crude purchases could raise India's oil import bill by $5-10 billion and inflation by 0.3 percentage points.
India could face an additional annual oil import bill of USD 5-10 billion if it halves its purchases of Russian crude, according to economist and former UN advisor Santosh Mehrotra. He cautioned that such a move would also stoke inflation and strain the rupee and the current account deficit.
Mehrotra noted that Russia currently supplies roughly half of India's oil, and at a discount to international prices. This pricing advantage has been instrumental in keeping India's import costs in check. Losing that edge, he argued, would have immediate financial consequences.
He estimated that a 50% reduction in Russian purchases could push inflation up by about 0.3 percentage points. However, he added that this impact could be mitigated if the government chooses not to pass on higher costs to consumers at petrol and diesel pumps.
Beyond inflation, the economist pointed to external sector risks. India's current account deficit has hovered around 0.6-0.7% of GDP in recent years, but replacing cheaper Russian barrels with costlier alternatives would put pressure on this balance and on the rupee.
Mehrotra also flagged global risks. Any disruption to Russian supply could drive international crude prices higher, affecting not just India but also the United States through elevated fuel prices and inflation.
On India-US trade negotiations, he advised New Delhi to bargain carefully rather than rush into a deal. He referenced a proposed US measure that could impose tariffs of up to 100% on major buyers of Russian energy, including India. However, he stressed that the measure has not been implemented and could still include exemptions.
"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," Mehrotra said. He urged India to protect its economic interests in the talks, given the significant implications of any sharp reduction in discounted Russian crude.