“Impact of the Russia-Ukraine War on India”
The global supply chain in the world economy has already been badly affected by the Corona epidemic, although there was some improvement after the epidemic subsided, the same Russia-Ukraine war is expected to affect the global supply chain again, This will affect the economy by not only India but many countries of the world. Where India is seeing rapid and direct negative effects in the field of the stock market, crude oil, etc., since the day of the war. India imports about 85 percent of its essential crude oil from abroad, and the effect of the increase in crude oil prices is directly visible in India. To prevent the Russia-Ukraine crisis, various economic sanctions are being imposed on Russia by Western countries, due to which there may be a possibility of increasing the inflation rate in India in the future. Russia’s economy will also have a huge impact on the rest of the world due to its vast energy resources.
The Reserve Bank of India is also concerned about rising inflation in India amid this Russia-Ukraine crisis. According to the experts of the Reserve Bank of India, the Russian-Ukraine war will affect the Indian economy less directly but indirectly.
India and Russia have a long and deep partnership in international trade. Russia is India’s 25th largest trading partner in the first nine months of FY 2021-22 with exports of $2.5 billion and imports of $6.9 billion, although India imports only one percent of crude oil from Russia. But Russia is the largest exporter of crude oil in the world. If Russia disrupts the supply of crude oil to other countries of the world, it will definitely have an indirect effect on the Indian economy, and oil prices in India may continue to rise. India imports coal, fertilizers, mineral fuels, jewelry, metals, etc. from Russia. Russia is the largest producer of coal and India is the third-largest importer of coal. Due to the current crisis, the supply of these goods may be disrupted, due to which there will be chances of inflation in the case of these items in India. Russia holds the top position in terms of production and exporter of wheat in the world, due to changes in wheat export quantity by Russia, inflation in wheat prices can be experienced in India. Russia is the main country in the exporting countries of India’s defense equipment, currently, 65 percent of the arms and equipment of the Indian Armed Forces are imported from Russia and India has to depend on Russia for its parts, however due to this crisis. There is not going to be much impact on the supply and agreements of defense equipment. Despite strict sanctions on Russia by Western countries, India is making agreements for defense equipment. Despite strong US opposition to India, India has procured the S-400 Triumph missile from Russia and talks are also underway on a deal worth over Rs 5000 crore with Russia for the manufacture of 203 assault rifles. India also does international trade with Ukraine. From Ukraine, India supplies nuclear reactors and boilers and necessary machinery, including edible oil, and fertilizers, while Ukraine imports goods like medicine and electronic machinery from India.
According to the statistics of Trading Economics, in the year 2020, India has imported $ 1.45 billion worth of cooking oil, $ 210 million of fertilizers, and about $ 103 million of nuclear reactors and boilers from Ukraine. Ukraine is one of the largest suppliers of nuclear reactors and boilers to India after Russia. In the midst of this Russia-Ukraine crisis, the supply of nuclear energy may be interrupted, due to which India’s work on nuclear energy may slow down. Apart from this, India imports many items from Ukraine like iron, steel, plastic, inorganic chemicals, etc. This crisis in India will have a direct impact on the import and export of those items which are directly imported from Russia and Ukraine. Since Russia and Ukraine are the largest producers of wheat in the world, there may be a decrease in direct imports of food grains to India. Due to this, the domestic prices of food grains may increase.
The effect of rising crude oil prices can affect India the most. Brent crude prices are increasing continuously. The continuous increase in the prices of crude oil and food items will have a very bad effect on India’s economy. Rising inflation, rising current account, deficit, and the impact of economic growth may add to the problems. The impact of the Russo-Ukraine war will be directly visible in India in the form of rising inflation in wheat, coal, cooking oil, crude oil, fertilizer chemicals, jewelry, etc. India is the third-largest importer of crude oil in the world. India has to import about 85 percent of its oil requirement from abroad. The Federation of Indian Export Organizations, a union of exporters, has said that the military crisis between Ukraine-Russia will affect the movement of goods, payments, and oil prices and consequently it will also affect the country’s trade. Bilateral trade between India and Russia stood at $8.1 billion in this fiscal year 2020-21. India mainly imports fuel, mineral oil, pearls, precious stones, nuclear reactors, boilers, machinery, and mechanical equipment from Russia. A $10 per liter increase in India’s crude basket could cut the annual GDP growth forecast for FY22 by 10 basis points from 9.2 percent, according to Quantico Research. Madan Sabnabis, Chief Economist, Bank of Baroda, said that the 10 percent permanent increase in the crude basket is due to WP. Inflation is based on me. 1.2 percent and Cp. I. based inflation may increase by 0.3 to 0.4 percent. Inflation will have a direct impact on the budget of the common man. In India, the Reserve Bank of India can take some big decisions to control inflation.
Russia-Ukraine crisis, due to rising crude oil and other import prices in the global markets, imports become expensive and exports become cheap, due to which there is a possibility of an increase in foreign exchange reserves and a reduction in the trade deficit. The deep impact of the Russian-Ukraine war on the Indian economy can be seen because if this war progresses towards the third world war, then there will definitely be a negative impact on business activities, first of all, the price of crude oil which is already high which is more. Maybe more, it will prove to be very negative for India, the country’s import expenditure will increase, due to which the trade deficit will also become more.