India’s state-backed energy producers are pushing for more exploration for the first time in decades. Today, we explain more.
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Macro
Jefferies sees the high borrowing target and slow fiscal consolidation to raise yields by 5-8 basis points. No capital gains-related tax relaxations for foreigners, coupled with continued rupee weakness, could further dampen fixed income markets.
Market consensus for growth is at 6.6 percent, far lower than the government's 7 percent, due to unemployment.Opposition leaders pointed out that the Budget still leaves behind youth unemployment and limited household savings.
Equities
Investors are disappointed with the surprise equity derivatives tax hike. Foreigners have already dumped $3 billion (₹273 billion) since the start of January, causing a 3.1 percent decline in the Nifty. The bill led to the Nifty’s worst Budget day performance in 6 years and will likely continue to exacerbate the decline in domestic equities.
Alts
High frequency traders may have to pare back operations in the options market. Taxes on option premiums and the exercise of options are rising by 50 and 20 percent respectively. The government will gain $1.7 billion (₹150 billion) from these taxes; the curbs make it nigh impossible to run market-making strategies in India.
Foreign companies are exempt from taxes on overseas services through 2047 for operating data centers in India.Modi wants to position India as a global hub for data storage and cloud infrastructure. The tax holidays and ease of building in India also help draw in more foreign capital which the government needs to stoke the economy’s growth.
Policy
A growing relationship with China caused exports to the country to shoot up 67 percent y-o-y in December. The importance of China is less of an export dumping ground, but rather as a supply chain partner. Clothing, electronics, and pharma companies need to get certain supplies and materials from there while infra-builders could access the $700 billion (₹63.7 trillion) procurement market there.
The 18 percent rise in defense spending protects against now US-backed Pakistan and rival China. India can no longer depend solely on the US, or even Europe, to defend borders against its two neighboring rivals. The rise in defense spending curbs those threats while supporting procurements from companies like Germany and France.
The Congress Party questioned a Modi reference in the Epstein emails, though the BJP dismissed the claims.The email says that Modi bent to Israel’s desires back in 2017 to appease President Trump. The BJP says that the email mischaracterizes Modi’s trip to Israel entirely. Anil Ambani is also present in the emails and is seen asking Epstein for US business contacts.
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India’s Huge Oil Exploration Gamble
India’s state-backed energy producers are pushing for more exploration for the first time in decades. A current issue facing them is that crude imports now make up 88 percent of national demand (up from 87 percent last year), a huge crutch that has to be constantly monitored and has been especially politically sensitive as the U.S. aggressively pushes for India to end its dependence on Russian crude. The strategy combines incremental expansion in proven offshore zones with a far riskier geological bet in ultra-deep waters.
At the center of the story is the Krishna–Godavari Basin on India’s eastern coast. Production from the KG-D6 block, operated by Reliance Industries in partnership with BP, delivers about 28 million standard cubic meters of gas per day and accounts for nearly a third of India’s domestic output. Sustained uptime close to 100 percent over more than a decade has made the basin a rare example of operational reliability in India’s upstream sector. For policymakers, this serves as proof that deepwater investment can translate into meaningful domestic supply. This is now encouraging further capital deployment even as extraction costs rise and geological complexity increases.
Yet the KG Basin alone cannot materially shift India’s structural dependence on imports. That reality explains the industry’s pivot toward frontier exploration, particularly in the Andaman Basin, where drilling targets lie beneath as much as 20,000 meters of water and rock. Optimists draw comparisons with Indonesia’s Sumatran petroleum systems, which have produced tens of billions of barrels of oil equivalent over several decades. But unlike Sumatra, the Andaman region still lacks confirmed commercial reserves, making current spending effectively a high-stakes geological wager rather than a development program.
State producers ONGC and Oil India have already committed substantial capital to this effort, including a multi-basin stratigraphic drilling campaign and rapidly rising annual expenditure. Both companies, working with BP, announced a $385 million (₹35.1 billion) stratigraphic drilling campaign across the Andaman, Mahanadi, Saurashtra, and Bengal basins. Oil India also announced a partnership with TotalEnergies to drill at various depths ranging from 6,500 to 20,000 feet.
Technology partnerships with international majors and service providers signal recognition that ultra-deepwater success depends as much on engineering capability as on geology. Even so, early indicators remain mixed; isolated gas shows and weather-related production disruptions highlight both promise and fragility. At the same time, ONGC has spent $6.8 billion (₹620 billion) in capex in FY25 compared to just $4.2 billion (₹374.9 billion) in FY24. Oil India has committed $2 billion (₹181.7 billion) in FY25 with $439.5 million (₹40 billion) just for data acquisition.
That being said, persistent import dependence exposes India to volatile crude prices, currency pressure, and geopolitical supply risks. Large domestic discoveries could reshape trade balances, strengthen energy security, and support industrial growth. Failure, however, would lock the country into continued external vulnerability while leaving state producers burdened with heavy capital outlays and uncertain returns. Whether this ultra-deepwater gamble delivers a breakthrough or becomes an expensive lesson in exploration risk will help define the trajectory of India’s energy security for decades to come.
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Written by Yash Tibrewal. Edited by Shreyas Sinha.
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