Leading economists believe the rising prices will lead to a widening trade deficit for India, which is a net importer of oil.
The Asian nation will be forced to buy more foreign currencies to meet its needs, according to CNBC, resulting in a weakened rupee.
India’s gross domestic product (GDP) could also be hit by the country’s reliance on imported oil, according to forecasts.
The rupee is already one of the most vulnerable currencies in Asia, along with the Indonesian rupiah and Philippine peso.
Rajiv Biswas, the executive director of IHS Markit, said the rupee could fall to 72 rupees against the dollar by the end of 2018.
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The currency closed at 70.16 against the dollar yesterday, marking a sharp 9.96 percent decline since the year began.
Mr Biswas said: “Due to India’s heavy reliance on imported oil and gas, the impact of rising world oil prices has significantly increased the oil import bill.
“This is the key factor that is driving the deterioration in India’s trade position, with July’s trade deficit hitting a five-year high.”
Radhika Rao, an economist at DBS Bank, said India’s oil import bill could soar to £88bn ($114bn) in the 2019 fiscal year.
Between 2017 and 2018, the country’s oil imports were about £68bn ($88bn).
Ms Rao said: “The net trade oil deficit has widened considerably, owing to a combination of high oil prices and a weak currency.”
Rising oil prices have been blamed on uncertainty over US sanctions on Iran and a steep drop in exports from Venezuela.
A recent report by Oxford Economics said India needed to stop relying so heavily on oil.
The report said: “Steadily rising per capita consumption has cemented India’s position as one of the largest oil importers in the world.
“This keeps the economy exposed to movements in global oil prices.
“India needs to lower its oil demand and in turn, imports, to make growth more resilient to higher oil prices.
“But we think this is unlikely in the next ten years.
“We forecast India’s oil demand to accelerate to an average annual pace of 4.4 percent in the coming decade, compared to 3.7 percent over the last ten years.
“This is expected to lead to steadily rising oil imports, with their share in GDP jumping to 5.5 percent by 2030 from 1.4 percent currently.”