MUMBAI: Moderation in international crude oil prices could save India up to $9 billion on its oil import bill in the current fiscal and help temper wholesale price inflation, even as the impact on retail inflation is likely to remain limited, according to a Bank of Baroda research report.The report, authored by economist Dipanwita Mazumdar, estimates that a 10% decline in international oil prices from current levels could reduce India’s oil import bill by $9-10 billion, equivalent to around 0.2% of nominal GDP. This would also support the current account deficit (CAD).International oil prices fell 22.2% between Oct 30 and Nov 10, following expectations of a possible peace agreement between the US and Iran after the US midterm elections. However, escalating attacks involving Saudi-led forces and Iran-backed Houthi rebels in Yemen could affect the sustainability of the decline. Brent crude futures were trading around $81 per barrel.The moderation in oil prices is expected to have a greater impact on wholesale price inflation (WPI) than consumer price inflation (CPI). Oil-sensitive components account for around 8.8% of the WPI basket. A 10% decline in crude prices could lower WPI inflation by 13-14 basis points through direct and indirect effects on petroleum products, aviation turbine fuel (ATF) and manufactured goods.The impact on CPI is expected to be largely neutral because retail prices of petrol, diesel and LPG are administered. Restaurant prices are also unlikely to respond to a temporary decline in oil prices, while the pass-through to airfares will depend on airlines and demand conditions.The report noted that consumers were largely insulated when international crude prices rose sharply, as retail fuel prices remained unchanged. A decline in global prices is therefore unlikely to translate into lower retail selling prices. However, the correction could narrow the divergence between CPI and WPI, offering some relief to manufacturers whose input costs had risen without a corresponding increase in consumer prices.On the fiscal front, higher fertiliser subsidies could increase the fiscal deficit by 0.2-0.3% of GDP. The FY27 Budget had allocated Rs 1.7 lakh crore for urea and fertiliser subsidies, including Rs 1.2 lakh crore for urea and Rs 54,000 crore under the nutrient-based subsidy (NBS) scheme.The NBS allocation has since increased to Rs 1.03 lakh crore, including Rs 41,534 crore for the kharif season and Rs 62,370 crore for the rabi season. Lower profitability of oil marketing companies could also weigh on non-tax revenue. However, higher nominal GDP growth and disinvestment receipts could provide some support to the fiscal position.Lower oil prices could also support the rupee, alongside a revival in foreign portfolio investor (FPI) inflows. Net FPI inflows rose to $7.1 billion in Nov, compared with outflows of $2.5 billion in Oct. The report attributed the revival partly to greater investor interest in emerging markets amid policy uncertainty in the US and moderation in AI-led valuations.Bank of Baroda expects the rupee to trade in the range of Rs 93-95 against the dollar in the near term, compared with its earlier forecast of Rs 94-95. However, the dollar index and expectations of tighter monetary policy in major economies remain key factors to watch.The impact of lower oil prices on bond yields is expected to be limited. While cheaper crude could provide temporary relief to India’s 10-year government bond yield, global yields and domestic monetary policy are likely to keep borrowing costs elevated. The report expects another 50 basis points of rate hikes in FY27, which could limit the decline in yields.