Page 7 - Policy Economic Report - April 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

• Currency dynamics

The elevated cost pressures are reflected in foreign exchange reserves declining from US$ 728.5 billion in
February 2026 to around US$ 700.9 billion by April 2026, indicating intervention to manage rupee
volatility amid oil price pressures. In April 2026, the Reserve Bank of India (RBI) stabilized the rupee against
depreciation pressures. The RBI intervened by conducting multi-pronged forex sales in both the spot and
non-deliverable forward (NDF) markets, while also restricting speculative trading to prevent excessive
volatility rather than targeting a specific rate.

As a result, the domestic oil sector is experiencing a dual shock: higher global crude prices combined with
a weaker currency.

Impact of Narrowing Trade Deficit via "Value vs. Volume"

In March 2026, India experienced a synchronized slowdown in international trade, with both exports and
imports contracting. Because imports fell faster than exports (5.76% vs. 4.58%), the overall trade gap
narrowed compared to the previous year. The total trade deficit narrowed to US$ 2.44 billion in March
2026 (from $3.55 billion YoY).

While global crude prices remained high ($111.4/bbl. in March 2026), the total value of imports dropped
because logistical bottlenecks (like the Strait of Hormuz closure) prevented high volumes of goods from
entering the country. Further, the contraction in exports reflects cooling global demand and geopolitical
disruptions affecting shipping routes.

Therefore, while deficit improved, the energy security of the country weakened because the physical
volume of oil imported was significantly lower.

• The crude imports fell by 17% (from 22.8 MMT in March 2024-25 to 18.9 MMT in March 2025-
26).

• The cost per unit was much higher, but since the import volume was low, the total dollar amount
spent dipped from $12.3 billion in March 2024-25 to $11.7 billion YoY in March 2025-26.

• Thus, the upstream companies benefit since they produce oil domestically & can sell it at higher
global market rates, significantly increasing their revenue. The OMCs faced margin compression
leading to under-recoveries.

Impact of Index of Eight Core Industries (ICI)

The Index of Core Industries (ICI) data for March 2026 translates into reflecting supply constraints for
Indian oil & gas sector: -

• The 5.7% year-on-year contraction in domestic crude oil production represents a significant
supply-side vulnerability. This decline has exacerbated India’s reliance on foreign energy, pushing
import dependency beyond its typical 85% threshold at a time of heightened global volatility.

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