Ukraine, Russia, and the Indian economy

War broke out between Russia and Ukraine on Thursday, the 24th of February, and at the moment the Russian military is steadily pushing closer to Ukraine’s capital. The war has disrupted the lives of many Ukrainians, and citizens fearing the violence are fleeing the country and crowding at the neighboring countries’ borders. Additionally, the effects are also being felt in Russia. Major sanctions have been put in place by the United States, the European Union, and other countries, and major firms such as Apple and IKEA have begun closing their local business in protest of Russia’s actions. The Ruble has been falling, and many economists think the walls of the Fortress may be coming down. 

Amidst the crisis, many may wonder how the war will affect the Indian economy. According to GlobalData, an analytics and consulting company based in London, India’s growth forecast is set to increase from 0.1% to 7.8% in the coming year. Rising commodity prices will push up inflation to a predicted 5.5%, along with the already record high crude oil prices. It has also stated that the value of the rupee is set to further depreciate against the US dollar. Energy prices are set to soar, and agricultural sector exports will take a hit. However, there is good news as well. Steel and aluminum manufacturers, a huge industry in India, can make large gains by selling to the EU. Banking sectors will overall be resilient to the conflict. 

It is presently unclear whether India will join NATO and the West in taking aggressive action against Russia, or will remain with it’s long-time ally. However, one thing that is clear, ticking to a passive cat-on-the-wall strategy will cause India to lose substantial control over its economic growth. Currently, India seems to be weathering backlash and managing to stay afloat by hesitating to take sides. Conversely, this can only last for so long and unless India takes decisive action, it will become a piece of driftwood in the storm that is the war in Ukraine.

India has much to lose and gain from siding with either side of this conflict, but the nation should be careful about entering such a conflict understanding the long term implications of it.

Written and collated by Rehaan Kambampati
Written with input from GlobalData