India Defends Russian Oil Purchases Amid US Pressure; GST Reforms to Boost Economy
Finance Minister Nirmala Sitharaman stated that India will continue buying Russian oil based on economic considerations, as it is the costliest item in the country's import bill. She asserted that the recent GST rate cuts, which simplify the tax structure to two slabs, would spur domestic demand and growth, offsetting the adverse impact of US tariffs on exports. An SBI research report estimates the GST reforms will cause a minimal revenue loss of ₹3,700 crore, far less than government projections.
Unpacked:
India relies on oil imports for nearly 90% of its consumption, making oil prices crucial for its economy. Russian oil is often offered at discounted rates, which helps India manage costs and inflation. India also emphasizes national interest and energy security, seeking to maintain strategic autonomy and avoid dependence on any single supplier.
Estimates of India's savings from Russian oil imports vary widely. Some reports suggest annual savings of about $2.5 billion, while others estimate up to $12.6 billion over three years. However, these savings are modest compared to India's $4 trillion GDP and have not always resulted in lower consumer prices.
The recent GST reforms simplify the tax structure by reducing the number of tax slabs to two. This is expected to make compliance easier, spur domestic demand, and support economic growth. The SBI report estimates a minimal revenue loss of ₹3,700 crore, suggesting the reforms are fiscally manageable.[Summary]
US tariffs can reduce the competitiveness of Indian exports, potentially harming sectors like steel, aluminum, and textiles. While GST reforms may boost domestic demand and partially compensate for lost export revenues, they are unlikely to fully offset the impact of major tariffs, especially in globally exposed industries.[Summary]