India could cut its annual fuel import bill by up to $3 billion by shifting crude oil out of Russia and into Venezuelan heavy crude, according to a report by SBI Research, highlighting a key macroeconomic benefit arising from the India-US trade deal. The estimate assumes discounts of $10-12 per barrel to Venezuelan heavy crude (Merey 16), which could offset the loss of discounted Russian oil without materially affecting domestic inflation.

The report notes that India’s dependence on Russian crude increased sharply after 2020, driven by deep discounts following Western sanctions on Moscow. Russia’s share of India’s oil imports exceeded 30% in FY25, up from paltry levels before the Ukraine war. However, SBI Research argues that India now has the flexibility to diversify its crude oil basket, with supplies available from nearly 40 countries, including Venezuela, Iraq, Saudi Arabia, the UAE, the US and West Africa.

The 18% rate is a major positive

These potential oil savings come on top of broader gains from the India-US trade deal, under which Washington has cut tariffs on Indian goods to 18%, a sharp drop from the previous level of up to 50%. SBI Research describes the 18% tariff as a major positive for India, restoring the competitiveness of Indian exports and placing the country among Asian exporters with the lowest tariffs in the US.

Following the deal, India now enjoys a clear tariff advantage over major Asian peers, including Vietnam and several Southeast Asian economies. This improved relative positioning is expected to support Indian exporters in sectors such as gems and jewellery, textiles, leather, chemicals, seafood and engineering products, which the report identifies as the main beneficiaries of the tariff reset.

Indian experts

Importantly, SBI Research notes that Indian exports had already shown resilience even under the previous punitive tariff regime. Despite facing tariffs of up to 50%, exports to the US nearly matched a hypothetical no-tariff scenario, underscoring strong demand fundamentals. The US now accounts for about 20% of India’s total exports in FY25 and FY26 (year-to-date), reflecting deepening trade integration.

Fuel domestic inflation

On the macroeconomic front, the report highlights that the trade deal is unlikely to boost domestic inflation, especially on the energy front. Even if India reduces its dependence on Russian oil, alternative supply options and discounted heavy crude ensure that energy costs remain manageable. As a result, the benefits of higher exports and trade competitiveness are not expected to come at the expense of price stability.

However, SBI Research cautions that the deal’s success depends in part on continued diversification away from Russian oil. While Russian crude volumes have already begun to decline, the transition will involve multiple supply mixes based on price discounts, shipping costs, refinery configurations and geopolitical developments.

Sensitive domestic sectors

The report also stresses the need to protect sensitive domestic sectors, particularly agriculture and dairy. It highlights India’s dominant global position in milk production and underlines that safeguarding the dairy sector remains strategically important for livelihoods, food security and rural incomes. Therefore, trade liberalization, notes SBI Research, must be calibrated to preserve these core strengths.

Currency markets

The currency markets have already responded positively. After the deal was announced, the rupee strengthened to 90.27 rupees per dollar, appreciating by more than a rupee, reflecting improved investor sentiment and expectations of stronger export inflows.

Overall, SBI Research sees the India-US trade deal as a net positive for the Indian economy, combining lower tariffs, improved export competitiveness, diversified energy supply and minimal inflation risks. If executed carefully, the deal could strengthen India’s external balance while supporting manufacturing growth, exports and energy security.