THE IMPACT OF GLOBAL CRUDE OIL VOLATILITY ON INDIA'S CURRENT ACCOUNT DEFICIT AND THE FISCAL VIABILITY OF PETROLEUM-BASED COMMERCE

Authors:

Mr. Saurabh Mannu Sale 1, Mr. Akash Kamlakar Kamble2

1Department of commerce, Dr. Bȁbȁsaheb Ambedkar Marathwada University, chh. Sambhajainagar, India.

2Department of commerce, Dr. Bȁbȁsaheb Ambedkar Marathwada University, chh. Sambhajainagar, India.

Abstract - India's position as the world's third-largest crude oil importer renders its macroeconomic fundamentals critically susceptible to international oil price fluctuations. This study examines the multidimensional impact of global crude oil price volatility on India's Current Account Deficit (CAD) and the fiscal viability of petroleum-based commerce over the period 2016–17 to 2024–25. The research is grounded exclusively in secondary data sourced from the Reserve Bank of India (RBI), Ministry of Petroleum and Natural Gas (MoPNG), Ministry of Finance, Petroleum Planning and Analysis Cell (PPAC), the World Bank, International Monetary Fund (IMF), and peer-reviewed academic journals. Employing descriptive analysis, trend analysis, percentage analysis, and comparative analysis, the study reveals that periods of elevated crude oil prices (such as 2018–19 and 2022–23) correspond directly with a widening of the CAD to approximately 2.1% and 2.0% of GDP, respectively, while concurrently inflating the subsidy burden on the exchequer and weakening the Indian Rupee. The paper further establishes that India's petroleum sector, despite its vulnerability, plays a dual role: as a generator of significant fiscal revenues through excise duties and as a source of structural fiscal stress when crude prices surge. The findings underscore the urgency of energy diversification, strategic petroleum reserves, hedging mechanisms, and pricing reforms as instruments of macroeconomic stabilization. The study concludes that a USD 10 per barrel increase in crude oil price adds approximately USD 14–15 billion to India's petroleum import bill, directly transmitting into CAD deterioration and inflationary pressures, with cascading implications for fiscal management and economic governance.

Key Words:  Crude Oil Price Volatility, Current Account Deficit (CAD), Petroleum Fiscal Viability, India's Energy Economics, Macroeconomic Stability, Petroleum Subsidies, Trade Balance