How is Russia vs Ukraine war impact on Indian Economy ?

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How is Russia vs Ukraine war impact on Indian Economy ?

The war between Russia and Ukraine has been going on for quite some time now. This has been a major cause of concern for India when it comes to both the oil and defense sectors. The conflict in Ukraine has forced India’s hand when it comes to formulating its foreign policy. This rise in defense spending has had an impact on the Indian economy. 

It’s no old news that oil prices are high. Crude oil prices have touched $100 per barrel even before Russia’s invasion of Ukraine. Now, after the Russian invasion, crude oil prices are under more pressure and they are likely to remain at high levels for a long time to come. The sharp rise in the price of oil means that there will be higher gas prices at the gas stations and a greater impact on the gross domestic

The Confederation of All India Traders (CAIT) has said that investors are getting worried about the trade war between Russia and Ukraine. CAIT president B.C. Bhartia said that the trade between Russia and India has already been hit badly, and the conflict between the two neighboring countries may have an adverse effect on the Indian economy and trade to a significant extent. 

CAIT said that Indian traders should forge partnerships with their Russian counterparts, who have been hit hard by the new Russian food embargo, as it might help in overcoming the adverse impacts of the trade war. CAIT also urged the government to intervene in the matter and take up the matter with Russia and Ukraine.

As more shipping and maritime companies halt their operations in Russia and Ukraine, major shipping company Maersk has also halted its operations in Russia. They’ve also put their freight rates on hold. 

As the conflict has impacted companies in India and other European countries, it may further have an impact on shipping companies in other parts of the world. 

In India, these are the main sectors that are impacted due to the ongoing conflict between Russia and Ukraine:

Ukraine war impact Oil 

Ever since the Russian invasion of Ukraine, the supply of crude oil has been limited and the prices have reached a seven-year high of $110 per barrel. This is a concerning situation because the global economy has been hurt by the soaring oil prices. 

It could lead to another recession in the global economy, just what the world doesn’t need. Since the invasion, crude oil prices have reached as high as $120 per barrel. This has also raised concerns among investors in the troubled Ukrainian economy. There is a close correlation between the Russian invasion and the price of oil on the global stock markets. 

Edible oil 

While Russia and Ukraine are the major suppliers of sunflower oil, the ongoing Russia-Ukraine crisis has threatened their dominance in the market, which has also led to a supply shortage. The global economic crisis has also been a factor in the shortage of sunflower oil. 

The supply and demand chain of sunflower oil has been disrupted, which has caused a shortage in the product. However, the demand and supply chain of sunflower oil has normalized in the fourth quarter, which will result in an increase in the price of sunflower oil.

Automobile sector 

The chip sector is the most vulnerable to the effects of the war between Russia and Ukraine. Chips are responsible for the performance and the efficiency of a large number of electronic devices ranging from mobile phones to aircraft. 

Semiconductors are used in almost 20% of the global trade, making them one of the leading global exports. Among the top three countries that are globally ranked in the chip, exports are Russia and Ukraine. The ongoing crisis between the two countries is creating a lot of unrest in the chip industry.

Agricultural sector 

Tensions between Russia and Ukraine are causing the prices of certain agricultural goods to rise. This could lead to an increase in prices in select areas across the globe. The concern in the market is due to the fact that these agricultural goods are key exports for Ukraine, with around a fifth of its total production being exported globally. 

The escalating tension follows the trade of sanctions that were imposed by the United States and the European Union against Russia. The market is moving to a more pessimistic outlook and increasing the prices of agricultural products.

Metals

It is possible that the price of copper will rise because the political situation in Ukraine is still uncertain. While it is difficult to predict how the situation will evolve, the market is currently predicting a relatively modest increase in prices for base metals. 

While it is difficult to predict how the situation will evolve, the market is currently predicting a relatively modest increase in prices for base metals.

Other Russia vs Ukraine war impact on Indian Economy

The global diamond market has been facing disruptions due to trade wars. Most of the rough diamonds are mined in Russia, which is also the largest manufacturer of polished diamonds.

Under the new restrictions, Russia might not be able to send polished diamonds to companies in the US, which is their largest buyer, at the same prices. This price dip could make margins for diamond polishers tight in the coming months.

Russia has lost a lot of markets and investments due to the war in Ukraine. They have been sanctioned by the US and other western countries like the UK, Germany, and France. The sanctions imposed on Russia have had a direct impact on the Indian economy.

At present, Russia is India’s second-largest trading partner. India imports more than $50 billion worth of goods from Russia. Goods like diamonds, petrochemicals, fertilizers, iron ore, and steel are imported from Russia. India exports more than $10 billion worth of goods to Russia including wheat, cotton, iron ore, and steel.

The Indian economy is already affected by external forces. With the war in Ukraine and Russia, the Indian economy is likely to be further affected. Indian economy depends on international trade and the war is likely to disrupt the trade with Russia.

This will result in lesser supplies of oil and gas coming into India. International trade is likely to be affected by the war. The Russian stock markets are already down and therefore the Indian markets will be affected by the same. 

The United States has declared an “economic war” on Moscow in response to the Russian invasion of Ukraine. With the aid of Europe, the United States is working to sanction major Russian companies and strongly criticize the Russian invasion of Ukraine.

The U.S. recently extended sanctions and asset freezes against Russian and Ukrainian individuals, companies, and banks in response to Kremlin’s actions.

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