Key facts
- India's energy import bill rose 81.6% year-over-year in May to $18.7 billion.
- Crude oil imports increased 7.5% and LNG imports jumped 16% in May compared to April.
- Higher global oil and gas prices due to Middle East conflict drove the surge.
- The increased import bill widened India's trade deficit and strained its finances.
- A potential U.S.-Iran deal and expected oil price drop could alleviate pressure on India's trade balance.
India's energy import bill surged by nearly 82% in May compared to the previous year, reaching $18.7 billion, as higher global oil and gas prices significantly increased the cost of crude and LNG imports. Crude oil imports rose by 7.5% and LNG imports by 16% from April to May, according to provisional data from India's oil ministry.
The sharp increase in the energy import bill was attributed to elevated international oil and gas prices, driven by the Middle East conflict. This situation forced India and other major importers to seek more expensive supplies from producers not reliant on the Strait of Hormuz, which had previously handled a significant portion of India's crude oil flows.
The widening trade deficit and soaring energy import bill have begun to pressure India's current account and overall finances. The country has experienced investors fleeing its capital market and its local currency reaching an all-time low against the U.S. dollar since the conflict began.
However, a tentative U.S.-Iran deal and the anticipated drop in oil prices, coupled with increased supply from the Middle East, are expected to help narrow India's trade deficit. A reopening of the Strait of Hormuz and softer oil prices would significantly benefit India's trade balances by reducing its crude import bill.