Crude Prices To Average At $83-88 In FY25, May Increase Govt Fiscal Burden: Crisil

The average crude oil prices are expected to surge in the fiscal year 2025 as compared to the previous year, highlights a report by Crisil.

"We expect crude prices to average USD 83- USD 88 per barrel in fiscal 2025, compared with an average of USD 83 per barrel the previous fiscal".

According to the experts the surge in the prices of the oil may increase the fiscal burden on the central government as the import bill may shoot up. India imports more than 80 per cent of the crude oil for the domestic needs.

The report also noted that during the June the Brent crude oil prices were broadly stable at USD 82.6 per barrel on average, however it was 0.7 per cent higher month-on-month and 10.2 per cent higher Year-on-year.

The budget aims to reduce the centre's fiscal deficit to 5.1 per cent of GDP in fiscal 2025 from 5.6 per cent in the previous fiscal year.

In the first two months of fiscal 2025, the centre's fiscal deficit stood at 3 per cent of the budget target, a significant improvement from 11.8 per cent during the same period last fiscal.

The report highlighted that the gross market borrowing is projected at Rs 14.1 lakh crore for fiscal 2025, representing an 8.4 per cent year-on-year decline. The government plans to borrow 53.1 per cent of the budgeted amount in the first half of the fiscal year.

Additionally, the current account deficit (CAD) is expected to average 1.0 per cent of GDP in fiscal 2025, compared to 0.7 per cent of GDP in fiscal 2024. This is due to a healthy momentum in goods exports and an anticipated moderation in imports, suggesting that the CAD will remain manageable this fiscal year.

Notably, India's current account recorded a surplus of 0.6 per cent of GDP in the fourth quarter of fiscal 2024, contrasting with a deficit of 1.0 per cent of GDP in the third quarter.

The report noted that India's real GDP to grow at 6.8 per cent during the fiscal year 2024-25. It stated that the high interest rates and lower fiscal impulse because of reduction in fiscal deficit has hampered the growth rate of the country. It also noted positive outlook for the rural economy of the country with the forecast of above normal monsoon.

Highlighting the real GDP growth rate during the fourth quarter of FY 2023-24 the report said “Real GDP growth moderated to 7.8 per cent on-year in the fourth quarter of fiscal 2024 from 8.6 per cent in the previous quarter”

The consumer Price inflation in the country is expected to soften to 4.5 per cent in fiscal 2025 from the 5.4 per cent during the previous fiscal.

The report also noted that the forecast of above normal monsoon is expected to bring relief to the food inflation however the non-food inflation can surge.

"Assuming a normal monsoon, we expect food inflation to soften. Non-food inflation could see a statistical uptick but is overall expected to remain soft on the back of benign commodity prices" said the report.

The CPI inflation eased marginally to 4.75 per cent in May from 4.83 per cent in the previous month.

The report also expected two policy rate cuts by the RBI (Reserve Bank of India) this fiscal year, it stated that the rate cuts may start from October 2024.

"Amid strong economic growth momentum, the MPC (Monetary Policy Committee) aims to see a durable reduction in inflation to 4 per cent for easing monetary policy" said the report.

The report noted that the RBI will monitor the momentum of the monsoon with other extreme weather events and geopolitical shocks for the next two months and further action on rate cut will be taken after that.

During the last MPC meeting in June, the RBI kept policy rates unchanged, while maintaining its stance of withdrawal of accommodation. The next MPC meeting is due in August. (ANI)