Page 8 - FIPI - Policy & Economic Report May 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

The Long-Term Consequences

? Because of the ongoing crisis in West Asia and shipping choke points like the Strait of Hormuz,
India actually imported slightly lower volumes of crude in April 2026 (20.1 MMT) as against 21.0
MMT in April 2025, but paid $16.3 billion compared to $10.7 billion in the same month last year;
a 50% increase in cost due to crude prices hovering over $110 per barrel.

? Imported inflation- The cost of transporting cement and manufacturing steel will thus rise which
creates "cost-push" inflation, driving up the cost of everyday goods.

? Fiscal impact- To protect consumers from the immediate impact of this energy crunch, the
government has already cut domestic excise duties on petrol and diesel by ?10/litre. This shields
the consumer but affects the government of tax revenue needed to fund infrastructure.

? Weaking of Rupee-Massive dollar outflows to pay for energy imports put downward pressure on
the Indian Rupee.

Wholesale vs. Retail Inflation Divergence

? While retail CPI inflation stood at a 3.48% in April, Wholesale Price Inflation (WPI) surged to 42
months - high of 8.3% in April on an annual basis, up from 3.88% in March this year.

? Data released by the Ministry of Commerce and Industry showed that the sharp rise in inflation
last month was primarily driven by higher prices of mineral oils, basic metals, manufactured
products, and non-food articles.

? Among the major categories, the annual inflation rate in the fuel and power segment soared to
24.71% in April, sharply up from 1.05% in March. Driven by external shocks like the West Asia
conflict, global energy commodities skyrocketed, having an inflationary impact on crude oil and
natural gas prices in India.

? Inflation in primary articles also rose significantly to 9.17% from 6.36%. Manufactured products,
which carry the highest weight in the WPI basket, recorded an inflation rate of 4.62% in April,
compared with 3.39% in March. Meanwhile, the WPI food index, comprising food articles and
food products, edged up to 2.31% from 1.85%.

India’s External Trade & the Oil & Gas sector

? The April 2026 trade data released by Ministry of Commerce and Industry highlights a growth of
13.59% in total exports, estimated at US$80.80 billion during April 2026, as against US$71.13
billion in April 2025.

? Merchandise exports during April 2026 increased to US$43.56 billion from US$38.28 billion in
April 2025, recording a growth of 13.78 %.

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