Chris Wood of global brokerage firm Jefferies said India’s "increased national self-confidence" has been manifested on the world stage in the past year and more in regards to its purchasing of cheap Russian oil.
India’s oil imports from Russia have surged from 0.4 million tonnes in March 2022 to a record 6.05 million tonnes in January after the Russia-Ukraine war that began on February 24, 2022. In this context, the Russian oil price is now trading at around a 35 percent discount to the Brent crude oil price.
In his weekly 'GREED & Fear' report, Wood said that despite initial pressures from the US on New Delhi, the Modi government "has been consistent in its public stance that it will continue to act in its own national self-interest, which is to buy cheap Russia oil."
"This stance was helped by the understanding that as the next big domestic market for American companies, such as Apple, to target it makes no strategic sense for Washington to pick fights with both Beijing and Delhi," he added.
India’s purchases of cheap Russian oil continue. And these transactions, Wood added, are increasingly in rupees.
Meanwhile, it is also the case that India’s macro vulnerability to a higher oil price is not as great as it once was as oil imports as a percentage of GDP have declined significantly over the past ten to 15 years, the strategist pointed out. Thus, annualised oil imports as a percentage of gross domestic product (GDP) have declined from a peak of 9.3 percent in Q4FY12 to 3.2 percent in Q1FY21 though they have since risen to 6.2 percent in Q4FY22.
Another related issue is that the current account deficit appears to be in a long-term downtrend, Wood further noted. The current account balance as a percentage of GDP rose from a deficit of 4.8 percent of GDP in FY13 to a surplus of 0.9 percent of GDP in FY21 though it fell to an estimated deficit of 1.9 percent of GDP in FY13 ended 31 March.
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Meanwhile, India's imports of Russian oil rose ten-fold last year, according to state-controlled lender Bank of Baroda report released earlier this month.
Russia has been selling energy at a discount to countries like China and India, which is the world's third-largest importer of oil.
India's purchases of oil from Russia during the last financial year saved it around $89 per tonne of crude, the figures showed.
Despite pressure from the US and Europe, India has refused to adhere to Western sanctions on Russian imports. New Delhi has also not explicitly condemned Russia's invasion of Ukraine.
India has defended its oil purchases, saying that as a country reliant on energy imports, it was not in a position to pay higher prices.
