Crude Oil imports account for just over a third of India's imports; and thus high Crude Oil prices coupled with a weak INR have resulted in persistent inflation despite high interest rates set by the RBI.
Also, this situation has resulted in rising government Petroleum (Oil sector) subsidies as the Indian Government continues to heavily subsidize retail fuels like Diesel, Cooking Gas and Kerosene.
If the price of Crude Oil refuses to correct despite a slowing world economy, and if the Indian Rupee fails to regain lost ground vs the USD; the Indian Government will have to rethink its policy of "unsustainable" Petroleum sector subsidies and instead plan for a gradual move to market driven - prices for fuel sold by the Oil Marketing companies.
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