India’s Monthly Oil Demand Plunges Most in 13 Years

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 country’s $2 trillion economy.

Fuel consumption fell 4.5% to 15.5 million tons in January from 16.2 million tons a year ago, the Oil Ministry’s Petroleum Planning and Analysis Cell said, Bloomberg reported on Monday.

Diesel use, which accounts for about 40% of total fuel demand in India, dropped 7.8% to 5.8 million tons, the biggest decline since September. Gasoline consumption fell the most since June.

Expansion in the world’s fastest-growing major economy is under pressure after Prime Minister Narendra Modi in November withdrew high-value currency notes in a country where almost all consumer payments are in cash. 

Growth in gross domestic product may slow to 6.5% in the year through March from 7.9% the previous year, according to an Economic Survey presented by the finance minister’s advisers.

“This decline in demand is due to demonetization,” according to Tushar Tarun Bansal, director at Ivy Global Energy. “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% of its crude requirement and the International Energy Agency expects it to be the fastest-growing consumer through 2040. 

According to Bansal, people in most areas are spending the same amount on fuel that they did before the money crackdown, although some rural areas and small businesses are still affected.

Petcoke consumption fell for the first time in more than a year, declining about 9.9% to 1.95 million tons. Gasoline consumption fell 0.6% to 1.8 million tons. Liquefied petroleum gas use expanded 16.4% to 2 million tons, while jet fuel demand increased 17.8% to 627,000 tons.