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How the Russian-Ukraine war will affect India’s economy

3/14/2022

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Ever since Russia  launched a military attack on Ukraine India’s concerns have also increased amid the scare of a third World War. Russia — Ukraine's war would have a far fetched effect on the Indian stock market as well as on the pockets of the middle class especially. Amidst all this, the global markets are apprehensive due to fear of the Third World War and the Asian markets are also trading in the decline since this morning. It will have a huge impact on the Indian economy.
Indian imports 90% of it's sunflower oil supply from Ukraine and Russia and due to this, there is a spike in prices and maybe downfall in supply in the near future. Prices of gold also increased with Rs.51,400, highest recorded in months. Hours after the news came out, Sensex dropped by —3.46% and thus obtained the position of the worst hit Asian Market.
Top stocks of Nifty50 such as Tata Motors, IndusInd Bank , Tech Mahindra , Bharti Airtel , Tata Steel , Mahindra and Mahindra were among the worst hit.  Russia also happens to be a key supplier to global energy demand, with Brent oil costing average $110 per barrel, fuel prices are going to increase in the near future.
The profound impact of this war can be seen on the Indian economy because if this fight escalates towards the third World War, then there will be a negative impact on business activities. Firstly, the price of crude oil, which has already gone up to $101 a barrel, may shoot up further and this will prove to be unfavorable for India. The country’s import expenditure will increase due to which the trade deficit will also go up further.

The oil and gas marketing companies have currently not put the burden of rising crude oil prices on the customers, but the reason for this is internal. It is believed there will be a steep increase in the prices of petrol and diesel after March 10. The increase in oil prices will also affect the freight movement and due to this the food items like vegetables, fruits, pulses, oil, etc. are all likely to be expensive.
The war between Russia and Ukraine is expected to increase inflation in India. If inflation rises, it will increase beyond the Reserve Bank's projected figures and the country's central bank will then be forced to increase the rates.
If the military operations continue for a long time, it will have serious implications for exports to and imports from that region. Oil and gas prices will zoom, there could be payment delays for traders. Stock markets were awash in red and the Indian currency slumped against the dollar on Thursday amid Russia’s attack on Ukraine pushing investors to seek refuge in safe-haven assets.

The conflict will impact oil and gas prices and it could have inflationary implications in the global economy.  India will be equally impacted, as the movement of goods will become difficult and a crisis in availability of goods and services. A war-like situation will put huge pressure on oil prices, and India is vulnerable to its oil import bills. The crude oil price hike will increase the transportation costs and it will subsequently impact costs of food.  Experts opine that the sharp jump in crude oil prices will pose inflationary, fiscal risks to the economy.

India has till now maintained a neutral stand on Russia Ukraine war, it has also appealed to both countries to exercise resistance and are hoping to pacify the situation. We are uncertain and uninformed as to what this situation will bring in the future and what consequences Russia will have to face for the act of this nature. We can only hope for the best.
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Written and collated by Arnav Salian 
Written with input from Business Standard News, The Print, Economic Times

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