Lower oil prices to cut subsidy, cool inflation, support growth

BENEFIT FROM SURGE IN RUSSIAN CRUDE IMPORTS | Indian crude basket seen $5/barrel lower than Budget estimates

- PRASANTA SAHU & MANISH GUPTA

INDIAN BASKET OF crude, a crucial determinant of government finances in India, may turn out to have a weighted average annual rate, up to $5/barrel lower than assumed in the Budget for FY24, many analysts feel, even as they insisted that these were early days for a definitive forecast.

Lower crude prices mean multiple gains for India on the fiscal and macroeconomic fronts, as the country is heavily dependent on imported oil to meet its energy needs, and natural gas and urea, whose prices are linked to crude, are also imported by the country in large quantities.

Though fuel prices are decontrolled, lower crude prices enable significant savings on revenue expenditure, thanks to the sticky fertilser subsidies, besides having a cooling effect on inflation, analysts said. Apart from the moderation in Brent crude and the OPEC basket prices, India has benefited from the surge in crude imports from Russia, at discounted rates."In the absence of any global shock, it is unlikely that the average price of the Indian crude basket will breach $85/barrel in FY24," India Ratings chief economist DK Pant said.