India could cut back its annual fuel import bill by as a lot as $3 billion by shifting crude oil sourcing away from Russia in direction of Venezuelan heavy crude, in response to an SBI Analysis report, highlighting a key macroeconomic profit rising from the India-US commerce deal. The estimate assumes reductions of $10–12 per barrel on Venezuelan heavy crude (Merey 16), which could offset the lack of discounted Russian oil with out materially impacting home inflation.
The report notes that India’s dependence on Russian crude rose sharply after 2020, pushed by deep reductions following Western sanctions on Moscow. Russia’s share in India’s oil imports crossed 30% in FY25, up from negligible ranges earlier than the Ukraine struggle. Nonetheless, SBI Analysis argues that India now has the flexibleness to diversify its crude basket, with provides accessible from almost 40 nations, together with Venezuela, Iraq, Saudi Arabia, the UAE, the US and West Africa.
18% tariff is a significant optimistic
This potential oil-saving comes alongside broader good points from the India–US commerce settlement, beneath which Washington has lowered tariffs on Indian items to 18%, down sharply from the sooner stage of as much as 50%. SBI Analysis describes the 18% tariff as a significant optimistic for India, restoring competitiveness for Indian exports and putting the nation among the many lowest-tariff Asian exporters to the US.
Submit-deal, India now enjoys a transparent tariff benefit over key Asian friends, together with Vietnam and several other Southeast Asian economies. This improved relative positioning is anticipated to help Indian exporters throughout sectors equivalent to gems and jewelry, textiles, leather-based, chemical substances, seafood and engineering items, which the report identifies as main beneficiaries of the tariff reset.
Indian consultants
Importantly, SBI Analysis notes that Indian exports had already demonstrated resilience even beneath the sooner punitive tariff regime. Regardless of dealing with tariffs as excessive as 50%, exports to the US almost matched a hypothetical no-tariff state of affairs, underscoring robust demand fundamentals. The US now accounts for round 20% of India’s complete exports in FY25 and FY26 (yr-to-date), reflecting deepening commerce integration.
Fuel home inflation
On the macroeconomic entrance, the report highlights that the commerce deal is unlikely to fuel home inflation, significantly from the vitality aspect. Even when India reduces reliance on Russian oil, different sourcing choices and discounted heavy crude be sure that vitality prices stay manageable. Because of this, the advantages of upper exports and commerce competitiveness are usually not anticipated to come back at the price of worth stability.
Nonetheless, SBI Analysis cautions that the success of the deal partly hinges on continued diversification away from Russian oil. Whereas volumes of Russian crude have already begun to say no, the transition will contain a number of sourcing combos relying on worth reductions, transport prices, refinery configurations and geopolitical developments.
Delicate home sectors
The report additionally underscores the necessity to defend delicate home sectors, significantly agriculture and dairy. It highlights India’s dominant international place in milk manufacturing and stresses that safeguarding the dairy sector stays strategically essential for livelihoods, meals safety and rural incomes. Commerce liberalisation, SBI Analysis notes, should subsequently be calibrated to protect these core strengths.
Foreign money markets
Foreign money markets have already responded positively. Following the deal announcement, the rupee strengthened to round Rs 90.27 per greenback, appreciating by over one rupee, reflecting improved investor sentiment and expectations of stronger export inflows.
Total, SBI Analysis views the India-US commerce settlement as a internet optimistic for India’s financial system, combining lower tariffs, improved export competitiveness, diversified vitality sourcing and minimal inflation dangers. If executed fastidiously, the deal could strengthen India’s exterior stability whereas supporting development throughout manufacturing, exports and vitality safety.
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