“Will widen our CAD” Investment Strategist V.K. Vijayakumar decodes impacts of crude oil on India

Sep 19, 2026

Keralam: On the crude oil outlook and its macroeconomic implications for India, Chief Investment Strategist at Geojit Financial Services Dr. V.K. Vijayakumar says, "...Right today, Brent crude has declined to around $98 a barrel. A few days ago, it shot up all the way to $106, $107 a barrel. When crude is trading around $100 a barrel, it will certainly have negative implications. Actually, the Indian basket of crude is much higher than that; it is a weighted average of Dubai crude, Oman crude, and light Brent crude, and it has even touched $120 a few days back. For every $1 increase in crude prices, India will have to incur an additional expenditure of around $1.5 billion to $1.8 billion on our import bill. So our import bill goes up to that extent on every one-dollar increase in the price of crude. If the price increases by five or ten dollars, can you imagine the impact? It will widen our current account deficit. And when the current account deficit gets widened, the rupee depreciates. Rupee depreciation means you will have imported inflation. After the outbreak of the war in the Middle East, the price of crude has spiked up hugely, but the government of India has passed down only one part of the price increase to the customers. So the government has been absorbing the subsidy burden to a large extent. If the price of crude remains elevated for an extended period of time, our fiscal deficit will also expand; it will shoot above the budget estimates, leading to further inflation..."