India’s monthly oil demand fell the most since May 2003 as the government’s crackdown on high-value currency notes continued to reverberate through the nation’s US$2 trillion economy.
Fuel consumption fell 4.5 percent to 14 million tonnes last month from 14.7 million tonnes the previous year, the Indian Oil Ministry’s Petroleum Planning and Analysis Cell said on Friday last week.
Diesel use, which accounts for about 40 percent of total fuel demand in India, dropped 7.8 percent to 5.3 million tonnes, the biggest decline since September last year.
Gasoline consumption fell the most since June last year.
Growth in the world’s fastest-growing major economy is under pressure after Indian Prime Minister Narendra Modi in November last year withdrew high-value currency notes in a nation where almost all consumer payments are in cash.
GDP growth could slow to 6.5 percent in the year through next month from 7.9 percent the previous year, according to a survey presented by the Indian finance minister’s advisers.
“This decline in demand is due to demonetization,” Ivy Global Energy director Tushar Tarun Bansal said. “I would expect this decline to be a one off and dissipate from February. This should result in a slower demand growth for diesel in the first quarter in 2017.”
India imports more than 80 percent of its crude oil and the International Energy Agency expects it to be the fastest-growing consumer through 2040.
In most areas people are spending the same amount on fuel that they did before the money crackdown, although some rural areas and small businesses are still affected, Bansal said.
Petcoke consumption fell for the first time in more than a year, declining about 9.9 percent to 1.75 million tonnes.
Gasoline consumption fell 0.6 percent to 1.6 million tonnes.
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