Accordingly, if the average crude oil price rises to $95/barrel in FY2025, then the CAD is likely to widen to 1.5% of GDP from ICRA's current estimate of 1.2% of GDP for 2024-25. CAD, which is the difference between value of India's imports and exports, is estimated at 0.8% in 2023-24.

India is more than 85% dependent on imports for its needs of crude oil, which is converted into fuels such as petrol and diesel at refineries. ICRA said the value of India's imports of petroleum crude and products declined by 15.2% YoY during April-February of last fiscal, even as volumes rose slightly in this period.

This was supported by the fall in average global crude oil prices as well as savings from stepped up purchases of discounted Russian crude. In volume terms, the share of crude petroleum imported from Russia jumped to 36% in April-February FY2024 from 2% in FY2022, while that from West Asian countries (Saudi Arabia, the UAE and Kuwait) fell to 23% from 34%, respectively.

ICRA estimates that the lower imputed unit value of imports of Russian oil, compared to imports from West Asia, has led to savings in India's oil import bill amounting to $5.1 billion in 2022-23 and $7.9 billion in 11 months of 2023-24, thereby compressing India's CAD/GDP ratio by 15-22 basis points in FY2023-24.

However, the extent of monthly discounts relative to price narrowed sharply over the fiscal, to 8 per cent on an average in September-February FY2024 from 23 per cent in April-August FY2024. Consequently, the savings related to purchase of Russian crude are likely to have dipped to $2 billion in September-February FY2024 from $5.8 billion in April-August FY2024, ICRA said.

Post the Ukraine war, some Western nations shunned Russian oil, leading to Moscow offering discounts. This led to Indian refiners lapping up the discounted oil. The recent conflict in the Middle East also poses threat to crude oil import route. Earlier this month, Iran first launched drone and rocket attacks on Israel, which retaliated by firing a missile.

India imports oil from Saudi Arabia, Iraq and the UAE as well as liquefied natural gas (LNG) from Qatar through the Strait of Hormuz, which is a narrow sea passage between Oman and Iran.