In 2006-07, India’s oil import bill was about US $ 48 billion. In 2007-08, it had gone up 40 percent, to US $ 68 billion. By way of comparison, the net invisibles surplus and the current account deficit were US $ 73 billion and US $ 17 billion (1.5 percent of GDP) in 2007-08, versus US $ 53 billion and US $ 10 billion (1.1 percent of GDP) in 2006-07.
For the April-June quarter of 2008-09, oil imports grew by 50 percent to US $ 25 billion from US $ 17 billion in April-June 2007-08. This was at an average price of about US $ 118 a barrel, which is close to where the price settled today (August 5). This translates to US $ 100 billion a year. So, other things equal, that is another US $ 32 billion added to the current account deficit, or over 2 percent of GDP added to the current account deficit.
This may have some implications for the rupee exchange rate. India’s Financial Express newspaper had an editorial that argued that the outlook for the US dollar is negative, so that the Indian rupee could strengthen against the dollar. On the other hand, India’s own current account deficit may come into play.