The import bill has already ballooned
The numbers are striking. India bought crude at $63 a barrel in January. By March and April, that figure had surged to $114–$116 — an increase of nearly 80% in just two months. Bagga estimates that India’s total annual crude and gas import bill, previously around $150 billion, could now climb to $200–$225 billion at current price levels.
“Who pays for that marginal $50 to $75 billion of extra import bill?” Bagga asked. “Is it the Indian consumer, is it the Indian government via its fiscal, or the refining companies?” Right now, the answer is largely the refiners — but Bagga is clear that this is unsustainable.
3 pressure points: Refiners, consumers, government
With no meaningful pass-through to pump prices yet, the pain is being quietly absorbed. But Bagga sees that changing, and soon. His base case: crude stays elevated at around $90 for the rest of the year. That $20-per-barrel rise over last year’s average of $70 will ripple across the entire economy.
The transmission channels are already visible. Fertiliser prices have risen around 50%, increasing the government’s subsidy burden by roughly one lakh crore rupees ahead of the upcoming sowing season. Petrol and diesel face a shortfall of Rs 15–20 per litre, which hasn’t been passed on. Once it is, inflation climbs and demand destruction follows quickly — particularly because any diesel price hike feeds directly into food inflation through logistics costs.
“You have no monetary policy fix for a supply shock like this,” Bagga said bluntly. “It has to be fiscal.”
Aviation: The most exposed sector
Among listed sectors, Bagga singled out aviation as being in serious trouble. He pointed to global precedents — airlines seeking government bailouts in the US, Lufthansa cancelling 20,000 summer flights in Europe — as evidence that the strain is universal. In India, where the sector is already thin on margins, the situation is acute.His prescription: treat aviation as infrastructure, not a luxury industry. “If we lose more players, we will have a monopoly or duopoly situation,” he warned, urging the government to step in with relief rather than treating the sector as a politically inconvenient case.
Consumer and quick commerce: Watch the earnings calls
For now, India’s consumer economy is holding. Urban demand is growing at around 8% and rural demand at 5–5.5%. Quick commerce companies are well-funded. But Bagga cautioned that the real test comes when the oil pass-through finally hits household budgets. Management guidance in the upcoming earnings season will be critical.
The broader verdict
Bagga’s core message is that India’s fiscal prudence may have to take a back seat. An energy-insecure economy absorbing an 80% crude price spike cannot simply wait it out. The government will need to decide — before May — how to distribute the pain between consumers, refining companies, and the exchequer.
The earnings hit is coming. The only question is who absorbs it, and how fast.