Crude imports widen trade deficit with Russia by 33% in FY24

New Delhi: India's trade deficit with Russia has ballooned to $57.18 billion in FY24, up 33% annually, on the back of rising crude imports, data from the commerce ministry showed.

Imports from Russia stood at $61.44 billion in FY24, up 33% annually, and exports at $4.26 billion, up 35%.

Crude oil imports from Russia stood at $46.49 billion during FY24, up from $31.03 billion in the previous fiscal, registering a 49.82% annual rise.

Indian imports and trade deficit with Russia have risen steadily since FY21.

However, it is the last two fiscals, FY24 and FY23, which have seen this trade deficit rise several-fold due to the increasing purchase of discounted Russian crude.

Widening trade deficit

The trade deficit with Russia has risen by over eight-fold between FY22 and FY24, while exports have risen by about 32% during this period.

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During FY22, India's trade deficit with Russia at $6.62 billion, with exports at $3.23 billion and imports at $9.87 billion.

India's crude imports from Russia have risen from $2.47 billion in FY22 to $46.49 billion in FY24, commerce ministry data showed.

India's top imports from Russia include crude oil and petroleum products, coal and coke, pearls, precious and semi-precious stones, fertiliser, vegetable oil, gold and silver.

India's top exports to Russia include drugs and pharmaceutical products, telecom instruments, iron and steel, marine products, machinery, etc.

Russia, facing sanctions from Western countries following its invasion of Ukraine, is currently the top supplier of crude to India, allowing India to save billions of dollars from the discounts on offer.

Falling discounts

These discounts, however, have been reduced in recent months.

As things stand, Russia accounted for about 40% of India's total crude oil imports in April.

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 A December brief from the global think tank Observer Research Foundation (ORF) states that India likely feels justified in importing Russian oil even amid extensive Western sanctions on Moscow—and Western pressures on New Delhi to stop doing so—to restrict inflation and promote economic growth, with “mineral fuels, oils, distillation products” dominating Indian imports from Russia since the start of the Ukraine war.

Experts said that the bilateral trade deficit due to the import of commodities and raw materials, in this case, crude oil with Russia, shouldn't be viewed negatively.

"We shouldn't be worried about the trade deficit with Russia due to our crude purchases, as we are adding value and also exporting them, which is fetching us foreign exchange," said Ajay Srivastava, founder of the economic think tank Global Trade Research Initiative (GTRI).

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"We shouldn't look a bilateral trade deficit (with certain countries) for commodities with wide applications (like crude oil)," he added.

Interestingly, India's exports of refined petroleum products and other chemical products rose steadily from $63.46 billion in FY22 (in value terms), to $91.17 billion in FY23, before falling to $80.45 billion in FY24.

India is a net importer of crude oil, as the country doesn't produce enough to sustain its energy needs.