Page 116 - Magazine 22-23 Qty.cdr

English Articles
Jyoti Moolaram Choudhary
(TYB.Com.)
The Impact of the Russia-Ukraine Rift on the Indian Economy

“Peace cannot be kept by force; it can only be achieved by understanding”. This is a
famous statement by Albert Einstein that denotes the importance of peace. The
invasion of Russia on Ukraine is the largest conventional military attack in recent
times and has caused economic crises in this world.
The ongoing conict between Russia and Ukraine has major ramications for the
global economy, which is just recovering from the stress of the COVID-19 pandemic.
The International Monetary Fund (IMF) indicated that both Russia and Ukraine
are major commodity producers and their disruptions have resulted in increasing
global prices, especially that of oil and natural gas.
On February 24, 2022, Russia and Ukraine entered a war, which affected the Indian
nancial system, resulting in outcomes and inuences on extraordinary areas and aspects. At a meeting at United
Nations (UN), India abstained from casting its vote. India has maintained a neutral stance within the UN
assembly. Russia supplies crude oil, natural gas and other resources to most of Europe, and Russia is also one of
the largest wheat producers in the world and accounts for more than 18% of international exports. India also
imports 84% of sunower oil from Russia and if all these supply chains are halted, it will have a signicant
negative impact leading to ination.
Some of the key points of the Russia-Ukraine conict and its impact, particularly on India and its economic system
are that the oil, natural gas, grain, and cooking oil shipments were disrupted because of the war in Ukraine. This
increased food and energy costs and since October 2022 food ination, which makes up the majority of India's
ination basket has been rising. However, in the past few months, measures have been taken by the Reserve Bank
of India (RBI) and the government as well, to curb domestic prices of key commodities, which have helped in
cooling ination.
The sharp rise in crude oil prices has resulted in an alarming ination rate as commodity prices in India are highly
inuenced by petrol and diesel prices. When these prices increase, the transportation of logistics costs also
increases resulting in an increase in the prices of domestic as well as international commodities since India
imports around $205 billion worth of oil and minerals: $832 million worth of precious stones, and $609 million
worth of fertilizers from Russia. (Report by Tax Guru).
As the conict started, investors' panic and nervousness caused the Sensex to fall by 2700 points, wiping out 7.5
lakh crores from the stock market. In India, the war led to one of worst falls in the BSE Sensex in the last 02 years -
the index crashed nearly 4,000 points in the rst 20 days of the war and investors witnessed massive losses.
According to the SBI report, India has limited connections with both countries in the banking and corporate
sectors, so the impact on these areas will be minimal.
Due to the conict, several non-Russian organizations operating in Russia ceased operations, the majority of
which were US-based or related, including PayPal, McDonald's, Disney and others.
Additionally, gold prices soared to $2000 per ounce. Because the equity market became volatile during the conict
and many investors switched from equity and other investments to gold investments since gold is regarded as a
haven in such circumstances. These sentiments in the market were also one of the reasons why gold prices went up
and equity and other markets went down.
Even though the Stock Market has witnessed recovery, the Indian currency is yet to see relief. When the war began
the Indian Rupee was priced at Rs. 74.57 against the US Dollar. It surged past Rs. 80 and is now on a steady
increase.
When an economy faces rising ination, the Central Bank is likely to raise benchmark lending rates to reduce it.
The Reserve Bank of India (RBI) took the same path as the Federal Reserve of the United States. As per, The
Times of India reports, in March 2023, RBI held an off-cycle meeting of its Monetary Policy Committee (MPC) in
response to persistent

104 "Until the lion learns how to write, every story will glorify the hunter." (African proverb)

HINDUJA HORIZONS 2022 -2023