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Volume IconWhat is at stake for India as Russia invades Ukraine?

As Russian troops stormed into Ukrainian, the Indian govt is scrambling all resources to evacuate its citizens from the country. The war will also have economic consequences. Find out what's at stake

Ukrainian tanks move into the city, after Russian President Vladimir Putin authorised a military operation in eastern Ukraine, in Mariupol,(Photo: Reuters)

Ukrainian tanks move into the city, after Russian President Vladimir Putin authorised a military operation in eastern Ukraine, in Mariupol,(Photo: Reuters)

As one air siren after another went off in almost every big city of Ukraine including its capital, their echo was heard worldwide. Apart from the humanitarian consequences of the war, the world will also have to bear its economic costs.

About 4,000-km away in India, the benchmark stock indices suffered their worst day in a year on Thursday. They fell 4.8%. Oil prices breached $100 a barrel for the first time since 2014, which is perhaps India’s biggest macroeconomic challenge. This came after Russia launched an invasion of Ukraine and carried out missile strikes on its infrastructure.

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As the world’s third-largest importer of oil, India relies on other countries for more than 80% of its crude oil requirements. The global price benchmark for crude oil, Brent, hit $105 a barrel after yesterday’s events. This could push India’s oil import bill, worsening its external position.  

Higher oil prices aggravate India’s inflation, widen the current account deficit and put pressure on the rupee. The rupee weakened 1.5% to 75.65 against the dollar.

Bank of Baroda’s Chief Economist Madan Sabnavis estimates that a 10% rise in oil prices would lead to an increase of 90 basis points in wholesale inflation, 

A 10% increase in crude oil prices will increase India’s Current Account Deficit by $15 billion or 0.4% of GDP, leading to a depreciation in the domestic currency, according to Sabnavis.

It could also force RBI to reconsider its accommodative stance. With Indian companies already reeling with surging input costs, higher oil prices and in turn higher fuel costs will exacerbate the situation across the board. 

Depending on the category and product type, up to 50% of an FMCG company’s raw material basket can be linked to crude oil. Crude oil and its derivatives are used in making detergents, soaps and cosmetics. Cement, paint, airline and tyre companies will also be impacted.

Economist Yuvika Singhal tells us more about the consequences the Russian invasion on the Indian economy in the short term

Both Russia and Ukraine are not major trading partners of India. But certain sectors and commodities could feel the heat. 

The two-way trade between India and Ukraine was $3.1 billion in 2021. India’s exports to Ukraine stood at $510 million, with pharma products making up 32% of it. Other exports include telecom instruments, iron and steel, agro chemicals, coffee etc. 

India imported goods worth $2.6 billion from Ukraine last year, $1.85 billion of which is vegetable oils, mainly sunflower oil. Ukraine alone accounts for 70% of India’s sunflower oil imports.  

Any supply disruption will raise the prices of sunflower oil as India meets over 60% of its edible oil needs through imports and sunflower oil accounts for 14% of India’s edible oil imports. 

Meanwhile, bilateral trade between India and Russia stood at $11.9 billion in 2021. India exported $3.3 billion worth goods and once again pharmaceutical products were the largest export commodity at $542 million.

Other top exports include electronics, iron and steel, tea and auto components. India’s imports from Russia last year were $8.6 billion. Major imports were crude oil, petroleum products, coal, fertilisers, gold, precious stones and precious metals.

 Russia is India’s biggest arms supplier, delivering half of the total arms imports. The United States and Europe have promised the toughest sanctions on Russia.

In addition to the impact on India’s economy and trade, the Ukraine crisis has a direct impact on thousands of Indian citizens. Over 18,000 students from India are in Ukraine studying medicine or engineering, forming roughly 24% of total international students there. A few hundred of them returned before Ukraine closed its airspace to civilians on Thursday.

From evacuation of Indian students to managing inflation and other economic consequences from the fallout of the Russia-Ukraine crisis, the government has a rocky road ahead.


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First Published: Feb 25 2022 | 8:15 AM IST

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