- India’s oil import bill could rise by $5-10 billion if Russian crude imports drop 50%
- India depends on Russia for about 50% of its oil supply, benefiting from price discounts
- Cutting Russian oil imports may increase inflation by approximately 0.3 percentage points
India's annual oil import bill could rise by $5-10 billion if the country cuts its purchases of Russian crude by 50%, economist and former UN advisor Santosh Mehrotra, warning that the move could also fuel inflation and put pressure on the rupee and current account deficit.
Santosh Mehrotra said India's dependence on Russian crude, along with the discounts offered by Moscow, has helped keep the country's oil import costs in check.
"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 in an interview with ANI.
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He said replacing a significant portion of discounted Russian crude with supplies from other sources could substantially increase India's import bill.
"If we have to reduce our purchases from Russia by 50 per cent, then it will have an impact on the oil import bill of 5-10 billion dollars for the entire year," he said.
Mehrotra estimated that such a reduction could increase inflation by around 0.3 percentage point.
The economist also flagged risks to the rupee and India's current account deficit as the country could be forced to pay more for crude from alternative suppliers. India's CAD has remained around 0.6-0.7% of GDP in recent years, he said, providing support to the economy.
A disruption to Russian oil supplies in global markets could have a wider impact by pushing crude prices higher, Mehrotra said, with potential consequences for fuel prices and inflation in both India and the US.
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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.
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.
"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.
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