Oil continues to be one of the most critical components of India’s economy. From transportation and manufacturing to electricity generation and household consumption, crude oil plays a central role in keeping the country moving. Despite rapid growth in renewable energy, India still relies heavily on imported oil to meet its daily needs.
Today, more than 85% of India’s crude oil demand is fulfilled through imports, making oil one of the largest contributors to the country’s total import bill. In fact, oil imports account for nearly one-fourth of India’s overall imports, highlighting why even small changes in oil prices or supply sources can have a major impact on inflation, trade balance, and economic stability.
Over the past decade, India’s oil import story has undergone a significant transformation—driven by global conflicts, price dynamics, and shifting geopolitical alliances.
Why Oil Imports Matter So Much to India
India’s total imports during FYTD26 (April–November 2025) stood at over US$ 515 billion, with oil alone contributing approximately US$ 121 billion. This sheer scale makes oil imports impossible to ignore when analysing India’s economic health.
Historically, India’s oil imports have closely followed international crude prices. When prices rise, the import bill increases; when prices fall, pressure on foreign exchange eases. However, recent years have shown a more complex picture, where oil imports and overall imports no longer move perfectly in sync—partly due to rising gold imports and changing consumption patterns.
Traditional Oil Suppliers: The Middle East’s Long-Standing Role
For decades, India has depended heavily on the Middle East for its crude oil needs. Countries such as Iraq, Saudi Arabia, UAE, Qatar, and Kuwait have consistently formed the backbone of India’s oil import basket.
Even today, these nations collectively account for nearly half of India’s oil imports. Their reliability, established trade routes, and long-term supply agreements have made them trusted partners. Although their combined share has declined slightly over the past ten years, they remain strategically important for India’s energy security.
The Rise of Russia as a Key Oil Supplier
One of the most dramatic shifts in India’s oil import strategy has been the rise of Russia.
A decade ago, Russia’s contribution to India’s oil imports was almost negligible—less than 1%. This changed rapidly after the Russia–Ukraine war in February 2022. As Western nations imposed sanctions on Russian oil, Russia began offering crude at discounted prices to alternative markets, including India.
For India, this presented a rare opportunity to secure oil at significantly lower prices. As a result, Russia’s share in India’s oil imports surged to over 30% by FYTD25, making it the single largest supplier for a brief period.
However, this dominance has started to soften in FYTD26, with Russia’s share declining to around 27.6%. The reasons lie in pricing dynamics and logistical challenges.
The Price Factor: What Really Drives Import Decisions
Oil pricing has been the single most important factor behind shifting import patterns.
Immediately after the Ukraine conflict, Russian crude was available at US$ 7–15 per barrel cheaper than Brent and other Middle Eastern suppliers. This price advantage made Russian oil extremely attractive to Indian refiners.
In recent years, however, this gap has narrowed. Russian crude prices are now much closer to Brent prices, reducing the financial incentive to rely excessively on Russia. At the same time, rising freight and insurance costs—partly due to sanctions—have further eroded Russia’s cost advantage.
As a result, India has begun diversifying its oil sources once again.
The Comeback of the United States
The United States has quietly regained importance in India’s oil import portfolio. While US oil exports to India were limited a decade ago, they grew rapidly in the post-Covid period.
In FYTD26, imports from the US have increased steadily. The narrowing price difference between US and Russian oil, combined with fewer logistical and regulatory complications, has made American crude more competitive.
This trend highlights India’s pragmatic approach—prioritising price stability, supply reliability, and risk management over long-term dependence on any single supplier.
Diversification Is the New Strategy
India’s current oil import strategy reflects a clear lesson from recent global events: over-dependence on one source is risky.
By maintaining a diversified import mix—including the Middle East, Russia, the US, and other emerging suppliers—India reduces exposure to geopolitical shocks, sanctions, and sudden price spikes.
This balanced approach also strengthens India’s negotiating power, allowing refiners to choose suppliers based on the most favourable commercial terms at any given time.
What This Means for India’s Economy
Shifts in oil import sources directly influence:
- Inflation: Lower oil prices help control fuel and transport costs
- Trade Deficit: A reduced oil import bill improves external balances
- Currency Stability: Lower dollar outflows support the rupee
- Energy Security: Diversification reduces supply disruptions
In FYTD26, India’s oil imports declined despite rising overall imports—largely due to lower global oil prices. This has provided some relief to the economy amid global uncertainty.
Looking Ahead: The Road Forward
While renewable energy adoption is accelerating, oil will remain central to India’s energy mix for years to come. The focus, therefore, will be on smart sourcing rather than complete dependence reduction.
Going forward, India is likely to:
- Continue sourcing oil from multiple regions
- Take advantage of short-term price opportunities
- Strengthen strategic petroleum reserves
- Balance economic benefits with geopolitical considerations
Final Thoughts
India’s oil import story is no longer just about buying crude—it is about navigating global politics, managing risks, and securing long-term economic stability.
The rise and gradual moderation of Russian oil imports, the renewed role of the US, and the continued importance of the Middle East all point to one conclusion: India is becoming a smarter, more flexible energy buyer.
In an unpredictable global energy landscape, this adaptability may well be India’s strongest asset.
