Current Affairs 2022 : Economic Impact of Russia-Ukraine War on India

By Yash Singhal

Russia-Ukrain war started in the last week of February is still continuing. Read here the economic Impact of the Russian-Ukraine war on India in detail.

War, a word that brings humanity to its knees and condemns every humanitarian law, enacted by any great organisation with a diverse range of viewpoints in order to promote harmony among people, to the death bed by violating each law that stood in the way of the ultimate goal of victory in the war. The ongoing crisis in Ukraine will have ramifications not only for the countries involved in the conflict but also for the rest of the world, with Asian countries bearing the brunt of the consequences. Every war in this modern world is accompanied by certain sanctions, and Russia has been subjected to these sanctions. However, it is unclear whether these sanctions have had a significant impact on Russia or whether they are simply a step to reduce the heat that has been generated in the political environment.

Starting of War

On February 24, 2022, Russian President Vladimir Putin declared war against the United States at a time that corresponded to Indian Standard Time (IST). This resulted in widespread tensions throughout the world, with all of the world's most important authorities taken by surprise by the news. Because of this, various stock market indices have fallen precipitously, with the Russian index plummeting by nearly 50%. As the day came to a close, major European Union countries announced their intention to impose sanctions on Russia, which would have a devastating effect on the Russian economy. Following that, the United States imposed a number of mild sanctions in the hope that Russia would refrain from invading Ukraine. With no success, the United States began to tighten the sanctions. Do these sanctions, on the other hand, have a real impact on the Russian economy?
Russia is the world's third-largest supplier of crude oil, and nearly one-third of the world's total energy supply comes from Russia, which is routed through Ukraine. Aside from that, Russia is responsible for nearly 90 per cent of the world's total neon gas supplies, which are used in the manufacturing of semiconductor chips. The international market for major metals supplies is also dominated by Russian monopolies in a variety of sectors, as well as a large share of the domestic market. As a result, tightening such sanctions will cause disruptions in the global supply.

Impact of Russia-Ukrain War on India

Since the invasion, Russia has risen to the status of global villain, provoking the entire world to turn against it, which is a once-in-a-century occurrence. Due to the fact choosing a side would be detrimental to India whether it is the United States or Russia; thus, India is presenting itself as a neutral state.
As a result of the sanctions imposed by many countries, the payment system for various procurements has been deferred. With India's economy is 80 per cent exposed to the international market for its energy requirements, a significant portion of that energy is imported from Russia. Due to significant international exposure and the need to comply with US and EU sanctions, India's payment route to Russia is through the State Bank of India (SBI). However, the SBI has already stated that it will not process any payments to Russia. As a result, Indian oil producers will face significant difficulties in obtaining supplies in the future. Also noteworthy is the threat of US Countering America's Adversaries Through Sanctions Act (CAATSA) sanctions against India, which would impose sanctions on any country that purchases major defence hardware from Russia, including the S-400 missile defence system, which is currently in operation.

As a result of the rising price of crude oil, India would be forced to deal with a significant increase in inflation. As the price of crude oil rises, the price of edible oil rises as well, and as the price of petroleum rises, it has a negative impact on almost every sector of the economy. In order to keep inflation under control, the Reverse Bank of India intends to raise the interest rate by 90-100 basis points in the near future. This will have a significant negative impact on the growing economy because loans will become prohibitively expensive to obtain.

The chips crunch is already being felt around the world, and it is having a significant impact on the global electronic economy. As a result of the impending sanctions against Russia, this situation will deteriorate even further, given the significant Russian involvement in this industry. The price of electronics commodities will skyrocket if the global economy continues to contract and global supply chains are put under even more strain. This will have a significant impact on the Indian household budget.

Metals, which make a major part of our daily lives, has also been majorly impacted by this war as most of the metals are either produced or refined in Russia or Ukraine, which is also witnessing a great price hike globally. With that, the auto sector has seen a major decline in its operating profits and is also seeing a scope of price hikes in coming quarters.

Even worse, travel will become more expensive in the coming days, compounding the problem. Airlines companies are preparing to raise ticket prices if the price of crude oil continues to rise, as it is having a negative impact on the company's operating costs.

In the coming days, pharmaceutical companies will also be impacted by the Russian invasion, and as a result, they will be looking to raise prices. Given that the pandemic is still ongoing, this could be a situation that causes the backbone of Indian households to crumble.

Conclusion

Given the numerous sanctions imposed on Russia, as well as the fact that Russia is a close ally of India, India must exercise caution at this time. Despite the fact that India is playing it safe internally in these circumstances, the sanctions will not only have an impact on the economy, but they will also have a significant impact in the long run. The country of India can benefit greatly from the current crisis, despite the fact that there are numerous issues to contend with. As we have seen, every nation on the planet is contributing to the loss of Ukrainian lives.

“To be an enemy of America can be dangerous, but to be a friend is fatal.”
- Henry Kissinger

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