India, the world’s third-largest oil importer, is navigating a complex energy landscape in 2025. The nation’s oil import bill is projected to rise, driven by increased demand, geopolitical tensions, and a strategic shift towards diversified sourcing.
Projected Oil Import Bill
India’s crude oil import bill for FY25 is estimated to reach between $101 billion and $104 billion, up from $96.1 billion in FY24. This increase assumes an average crude oil price of $85 per barrel . However, recent geopolitical developments, such as the escalation of tensions in the Middle East, have led to a surge in oil prices, potentially pushing the import bill higher. For instance, Brent crude oil prices recently spiked by 11.3% to $77.2 per barrel, marking a significant one-day gain .
Diversification of Oil Suppliers
India’s oil import strategy is evolving. In 2024, Russia emerged as the top supplier, accounting for approximately 36.3% of India’s crude oil imports. Other significant suppliers included Iraq (20.5%), Saudi Arabia (13%), UAE (9%), and the United States (3.5%) .
Efforts are underway to diversify sources further. Initiatives to increase imports from Brazil and enhance oil diplomacy with countries like Guyana are part of India’s strategy to reduce dependency on traditional suppliers and mitigate risks associated with geopolitical uncertainties .
Surge in Oil Demand
India’s oil demand is projected to grow by 3.39% in 2025, reaching 5.74 million barrels per day (bpd), more than doubling China’s growth rate. This surge is driven by robust economic activity, increased infrastructure development, and a rise in diesel consumption .
Economic Implications
The rising oil import bill poses several economic challenges:
- Current Account Deficit (CAD): Every $10 per barrel increase in oil prices could widen India’s CAD by approximately $15 billion, potentially reaching 1.2% of GDP in FY26 .
- Inflationary Pressures: Higher oil prices can lead to increased costs for transportation and manufacturing, contributing to overall inflation.
- Currency Depreciation: The Indian rupee has faced downward pressure, with projections suggesting it could weaken beyond ₹86 per USD due to soaring oil prices and reduced investor risk appetite .
Strategic Shifts and Future Outlook
India’s energy strategy is adapting to these challenges:
- Refining Capacity Expansion: Investments in refining infrastructure aim to enhance processing capabilities and reduce dependency on imported refined products.
- Energy Efficiency Initiatives: Policies promoting energy efficiency and the adoption of alternative energy sources are being prioritized to mitigate the impact of rising oil prices.
- Geopolitical Engagement: Strengthening energy ties with diverse nations and participating in global energy dialogues are key components of India’s strategy to ensure energy security.
Looking ahead, India’s oil import dynamics in 2025 underscore the need for a balanced approach that combines diversification of supply sources, strategic investments in energy infrastructure, and proactive economic policies to navigate the complexities of the global oil market.
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