According to a senior official in the ministry of external affairs, which has an energy diplomacy division, China's energy acquisitions are funded by its huge current account surplus, while India has a current account deficit.
India's oil import during in the first eight months of this fiscal were valued at $64.85 billion, up 21% from a year ago. In the same period, India's trade deficit stood at $81.67 billion, up 19% from a year ago. Such deficit is financed by large capital inflows into the country, particularly from foreign institutional investors, which are highly volatile in nature. During times of a financial crisis, portfolio investments are prone to 'capital flight,' said an energy expert, who asked not to be named.
The import dependence of the two fast growing emerging markets is set to grow significantly due to the fast economic expansion and the changes in people's lifestyle. In 2009-10, India imported 76% of its crude oil requirement, whereas China imported 53% of its requirement, according to BP statistical review of world energy 2010.
Even if India's domestic production goes up from 35.4 million tonnes a day now to 50 million tonnes a day in the next decade, its import requirement would be still high at 87%. China, on the other hand, would need to import 60% of its needs by then, industry chamber CII said in a recent report. Such high import requirement from the world's leading consumers of oil would lead to desperation in acquiring foreign energy assets, said an official from the chamber. Already, India's state-run firms such as ONGC have lost out on many bids to Chinese companies like CNPC and Sinopec in acquiring overseas energy assets.
The petroleum ministry is now waiting for specific proposals from the National Manufacturing Competitiveness Council for setting up an SWF to acquire raw materials and assets from abroad not only in the energy industry but across all sectors.