On 24th Feb/2022, Russian President Vladimir Putin announced a military operation in Ukraine and warned other countries that any attempt to interfere with the Russian invasion would lead to significant consequences. The move on Thursday came after months of speculation about Russia’s intentions when explosions rang out in Kyiv, Kharkiv, Odesa and other major cities across Ukraine. After getting battered by the pandemic, the Indian economy and business are poised to be sent on another unpredictable course by the Geopolitical Crisis.
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Impact of Russia-Ukraine War on Indian economy
The increasing crisis between Russia and Ukraine has made a massive impact on the global economy and has also spread its wings into Indian industries.
➢ IMPACT ON CAPITAL MARKET
Due to the potential Russo-Ukrainian tensions, the Indian stock market has been beating heavily over the last few weeks. This news of the Russia-Ukraine war had a significant impact on the Indian stock market as the Sensex fell 1,800 points while the Nifty fell by over 500 points as soon as the market opened on 24th Feb. In India, where the overall trend is bullish, there may be high volatility over the next month resulting in regular investors’ sell-offs while keeping new investors at bay. The market is likely to take a further beating as oil prices are expected to remain elevated. Investors flock to safe-haven assets like gold or real estate as the market is experiencing higher oil prices and equity sell-off. The gold prices in the domestic market crossed Rs 51,400, the highest in the last few months.
➢ IMPACT ON EXCHANGE RATE
As per the economic analysts, If the Russia-Ukraine war continues, the exchange rate will also be affected due to further depreciation of the Rupee, increasing the total trade spending of the country. With the increase in the country’s import expenditure, the trade deficit is expected to increase.
➢ IMPACT ON OIL PRICES
The Russian invasion of Ukraine will not just impact global oil prices, and still, as India is a significant importer of oil, there will also be a rise in the prices of LPG cylinders, petrol and diesel in India. According to a study, the surge in oil prices is likely to increase India’s Wholesale Price Index (WPI) by nearly 0.9 per cent and impact India’s inflation.
➢ IMPACT ON FOOD PRICES
Experts opine that the sharp jump in crude oil prices will pose inflationary and fiscal risks to the economy affecting the subsidy on LPG and kerosene. The hike in the price of crude oil is likely to increase transportation costs, and it will subsequently improve the costs of food. Moreover, together with Ukraine, Russia accounts for nearly one-fourth of total global wheat exports. If there is an interruption in the flow of grain from the Black Sea region, it could significantly impact prices and fuel food inflation.
Experts believe that prices of various commodities will increase shortly from natural gas to wheat due to the Russia-Ukraine war. As the situation takes a turn for the worse, supply chains are likely to get disrupted, adversely affecting Asian countries like India.
