India’s refined petroleum demand growth forecast has received a major downgrade, with rising crude oil import costs, a weaker rupee and government-led austerity and conservation measures expected to dramatically cut oil demand. According to Kpler, India’s refined products demand growth will now come in at just 77,000 barrels per day (kbd) in the current year, down nearly 40% from its previous forecast of 128 kbd.
The data and analytics firm has revealed that India’s state-run retailers are passing rising import and crude costs to consumers due to global energy disruptions, with the cumulative pump price hike currently over ?7.5 per litre for both petrol and diesel.
India imports 85% of its total crude oil needs, making it one of the largest oil consumers globally. The country consumes roughly 5.5 million barrels of crude oil per day, with Russia accounting for more than one-third of India’s total crude import volume. However, roughly 70% of India’s crude oil imports are now routed outside the Strait of Hormuz to bypass regional shipping conflicts, a significant increase from the previous baseline of approximately 55% before the crisis. India is currently sourcing crude from over 40 countries, reducing its reliance on traditional, high-risk Gulf routes.
“Recent austerity measures suggest Indian policymakers are increasingly prioritising macroeconomic stability, inflation management, FX preservation and fuel supply security over near-term transportation fuel growth. While the measures are unlikely to trigger outright demand destruction, they are expected to materially slow India’s previously robust transportation fuel growth trajectory during the second half of the year,” the report said, as reported by The Telegraph India.
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According to Kpler, India’s gasoline demand faces the steepest downside risks, with growth projected to clock in at 38 kbd, down from 63 kbd, thanks to commuting and discretionary mobility trends weakening. Diesel consumption growth is projected to take a 50% hit to just 6 kbd, reflecting a slowdown in heavy freight and commercial activity, while jet fuel demand growth projection has been slashed by a similar margin due to an expected cooling in consumer and corporate aviation demand.
Meanwhile, rating agencies like ICRA have trimmed India’s GDP growth forecast to roughly 6.2%, with crude oil prices nearly $30/bbl higher than before the Middle East conflict started in late February. India’s economy is already feeling the heat from high oil prices, with foreign exchange reserves shrinking from $728 billion at the end of the fiscal year to $691 billion by mid-May heavily pressured by a widening current account deficit, capital outflows and surging global crude oil prices.
The country has implemented a number of nationwide fuel austerity measures to try and manage the unfolding crisis, with the government actively restricting non-essential fuel consumption in a bid to preserve foreign exchange and protect state-run retailers from soaring import costs. The government has been urging citizens to carpool and utilize public transportation as well as work-from-home arrangements so as to reduce fuel consumption.
Further tightening the belt, Prime Minister Narendra Modi has urged Indian citizens to voluntarily postpone non-essential gold purchases and overseas travel for at least a year. The government has raised import duties on gold and silver from 6% to 15%, shifting the Basic Customs Duty to 10% and the Agriculture Infrastructure and Development Cess (AIDC) to 5%.
The government has also adopted stricter compliance measures on duty-free gold imports for manufacturers to prevent the misuse of the export advance authorisation scheme. India’s gold imports hit a record high of nearly $72 billion in the 2025-26 fiscal year, with total import volume clocking in at roughly 721 tonnes thanks to strong demand driven by festive buying and a significant shift towards gold bars and coins over jewelry. Roughly 440 tonnes was linked to jewelry purchases, with another 280 tonnes spent on gold bars and coins reflecting a high investment trend.
India is working hard to grow its domestic crude oil production and curb its heavy reliance on oil imports. Modi’s government is targeting ~$100 billion in domestic exploration investments by 2030 to unlock reserves and incentivize domestic production. Indeed, the government has already opened up approximately 1 million square kilometers of previously restricted no-go offshore zones for hydrocarbon exploration. Indeed, the landmark regulatory shift, spearheaded by the Directorate General of Hydrocarbons, opens nearly 99% of India’s Exclusive Economic Zone, including the deepwater Andaman Basin, to private and public operators.
Once off-limits due to overlapping defense and space launch trajectories, the Andaman-Nicobar basin is now the focal point of India’s deep-sea exploration ambitions. The Andaman Basin covers roughly 225,000 square kilometers in the southeastern Bay of Bengal. Government officials estimate the total hydrocarbon-in-place at around 72 million metric tons of oil equivalent (mmtoe).
Meanwhile, state-owned Oil and Natural Gas Corporation (ONGC) has partnered with international operators like BP Plc (NYSE:BP) to revitalize major assets such as the Western Offshore and Mumbai High fields using advanced recovery technologies to boost yields.
By Alex Kimani for Oilprice.com
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