CHENNAI: India’s crude oil import bill declined sharply in December, offering relief to the country’s external account as softer global oil prices offset a marginal rise in import volumes. Data from the Petroleum Planning and Analysis Cell shows that the oil import bill fell 8.5 per cent year-on-year to $9.7 billion in December, compared with $10.6 billion spent in the same month last year. This decline came despite India importing a higher volume of crude, underlining the impact of lower international prices on the overall import cost.
In volume terms, India imported 20.8 million tonnes of crude oil in December, up from 20.2 million tonnes a year earlier. The increase reflects steady domestic fuel demand driven by economic activity, transport consumption and refinery throughput. However, the rise in volumes was more than offset by a moderation in average crude prices, which eased from the elevated levels seen a year ago amid improved global supply conditions and softer demand expectations in key consuming economies.
The fall in the oil import bill is significant for India, which depends on imports for more than 80 percent of its crude oil requirements. A lower oil bill directly helps narrow the trade deficit and eases pressure on the current account, especially at a time when global financial conditions remain uncertain and foreign capital flows have been volatile. It also provides some buffer against currency weakness, as reduced dollar outflows for oil imports can help contain pressure on the rupee.
From a macroeconomic perspective, softer crude prices have broader implications beyond the trade balance. Lower input costs for refiners and downstream industries can help moderate inflationary pressures, particularly in fuel-linked components such as transport and logistics. This, in turn, creates some policy space for the government and the central bank, even as they remain cautious about global risks and domestic price stability.
However, the outlook for India’s oil bill remains closely tied to global crude price movements, which are influenced by geopolitical developments, production decisions by major oil-producing nations, and shifts in global demand. Any renewed spike in prices could quickly reverse the recent gains, especially if accompanied by sustained growth in domestic consumption.
The December data highlights how favourable price dynamics in global energy markets can materially improve India’s external metrics, even as the economy continues to import large volumes of crude. While the decline in the oil bill offers short-term relief, policymakers and markets alike will remain watchful of global oil trends in the months ahead, given their critical role in shaping India’s trade balance, inflation trajectory and currency stability.