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

geopolitical pressures and raised the repo rate for the rst time since August 2018. There have been three rate
increases in a row so far, bringing the total increase to 140 basis points. The policy repo rate is now 5.4%, which is
higher than it was before the pandemic.

While the Ukraine war has put a strain on India's economic prospects, the same war has also resulted in the West
looking towards India as a potential partner against China. Global multinationals are putting the building blocks
in place for a China +1 strategy and this is most pronounced in Pharma and Specialty chemicals. “India is in an
extremely fortunate position of being close to becoming the largest populated country in the world, bigger than
China. Its demographics suggest that it has the potential to grow closer to 10 percent per annum for the next
decade, but it would require much bolder reforms,” says Jim O'Neill, Chairman of Chatham House and Author of
the BRICS report. Therefore, India needs to get its act together, as the world decouples from Russia and its partner
China, to bring in more investment interest. The Russia-Ukraine war is creating an unlikely opportunity for
selective Indian agricultural products, especially wheat, maize, millet, and other processed foods.
The United States of America and a lot of its ally organizations decided to stop working in Russia during this
conict. The international organization known as SWIFT (Society for Worldwide Interbank Financial
Telecommunications) has decided to end its relationship with Russia. SWIFT is connected to more than 200
countries and more than 11,000 banks worldwide. It handled more than 4 million transactions in a single day. This
situation has created a void that can be lled by India's UPI (Unied Payments Interface). The use of UPI has
increased signicantly over the past few years. A report by Tax Guru states that in the scal years 21-22, UPI
processed more than $1 trillion in transactions. If UPI can ll this void and replace SWIFT in the Russian market,
it will be a signicant advancement for India's nancial sector. However, on the other hand, there could be a
signicant outow in foreign investment as the impact of all this could have severe implications on India's balance
of payments.
If we compare India's consumer prices to those of other major economies, it will become abundantly clear that
India is recovering at a much faster rate. In February 2023, the CPI ination rate in India was 6.1% as compared to
the United States which was 7.9%. As a result, Foreign Institutional Investors (FIIs) have been pumping money
into Indian equities again. From August up to now, they had bought shares worth Rs. 16,218 crore. This is in sharp
contrast to previous months when FIIs were only interested in withdrawing their money from Indian equity
markets. India is anticipated to experience the fastest rate of economic growth among major economies, as stated
in the most recent World Economic Output report released by the IMF.
The conict between Russia and Ukraine has demonstrated that sanctions against a country in conict are not the
best option because they have an excessive impact on other countries that are not involved in the conict. This is
especially true if the countries in conict are trading partners of other countries that are not involved in the
conict. This war will benet some industries, such as oil and gas and both ferrous and non-ferrous metals, while it
will hurt those that rely on oil as a primary input, such as chemicals, fertilizers etc. The ongoing tensions between
Russia and Ukraine have had a signicant impact on global trade. The supply chains have been disrupted all over
the world and experts believe that these disruptions will have a negative impact on the Indian economy.
The most likely scenario shortly is volatility. India's public and private sectors will need to work on resolving
legacy issues of energy security, ination, and resilience as the country begins to recover from the pandemic-
induced economic slowdown. The Indian economy's future will be affected by supply-side shocks, variations in
demand, the course of the conict and the extent of global sanctions. These factors will also open some new
opportunities. However, given the supply disruptions that have caused the skyrocketed prices of cooking oil and
fuel across the world, the international community should come forward and resolve the ongoing conict through
peaceful negotiations and rescue the global economy, especially in the developing countries.

105 "Victory has a thousand fathers, but defeat is an orphan." (John F. Kennedy)

HINDUJA HORIZONS 2022 -2023