Lately, the conflict in some parts of the world has increased the price of crude oil, threatening developing economies like India. However, India’s friendship with Russia has paid off again. According to ICRA, India saved more than $7.9 billion on oil imports in FY 23-24 by buying discounted crude oil from Russia. This is a 50% increase in savings compared to FY 22-23, which was a mere $5.1 billion. The discount has led to a compression of around 15-22 points in India’s current account deficit-to-ratio in 2023-2024.
However, the note also added that if the same discount rates prevail, India’s oil exports can increase to around $102 billion in FY 24-25 from around $96 billion in FY 23-24. Based on the latest data from the Commerce Ministry of India, the country’s share of Russian oil in its total oil exports reached an all-time high of 36% in FY 23-24. This is a 1700% increase as compared to 2% in FY 2022-23.
Russia presented India with a great opportunity, and it has proved to be vital for India to secure its energy needs. This was even more significant as oil prices in OPEC+ nations were climbing, citing the disputes and conflicts happening in the world right now. Moreover, oil imports are extremely important for India, and even a slight discount can benefit the country, considering that around 83% of India’s total oil expenditure comes from imports.
Russia’s low oil prices are due to the market’s shrinkage since the Russian-Ukraine conflict. Also, the USA has sanctioned Russia, and due to this, many European countries are shying away from buying Russian oil, shrinking the markets even further. This has opened up an opportunity for emerging economies like India.
