- Date : 10/05/2022
- Read: 3 mins
The Indian economic dynamics need to prepare for unknown challenges it has to face as the wrath of the Russian conflict with the West takes a toll on the global economy. Analyzing the effects of war and the upcoming pressures leading to inflation throughout the country.
The flagging threats raised by the invasion of Russia within the boundaries of Ukraine do not settle between the two borders. Ukraine Russia war has had adverse effects on a global landscape with the powering positions the two nations stand-in. As the West raises the stake with their attempts of shunning trade and order with Russia, let us understand the impact of these decisions on our doorstep. Multiple experts stress that the effect on India's international trade and economy could be serious, with a few who challenge these claims. To start with, the charts of the stock market had previously responded, with significant lists falling by about 10% since February 1, although they recuperated around the time of the state election.
Most organizations and financial specialists are certain that the effects of war will be re-tracked at a faster pace since the world can't manage the cost of a tedious clash or relentless political strain in Europe. All things considered, the global trade was adjusting to the US-China trade pressures that have endured for a really long time. China's arrangement with Russia and new strains over Taiwan, could now tighten up the tension.
The rising inflation in India
Although it is estimated that this Ukraine Russia war won’t take an ever-lasting toll on our economy, let’s have a look at some immediate concerns that need addressing.
With the rising charts of imports from Russia and a noticeable fall in the export charts, the gap has been increasing now more than ever. Majorly India imports its mineral oils, pearls, nuclear reactors, machinery, boilers, mechanical appliances and fertilizers from Russia. The increase in these prices is bound to raise inflation in multiple correlated sectors. The exports of raw machinery and electricals to Russia have only been able to cover so much.
In an interview with The Print, Sharad Kumar Saraf, a renowned exporter headquartered in Mumbai, discussed the impact the crisis will have on the country's exports, citing the escalating impositions imposed by the West in their sanctions against Russia. The interconnection of the economies in this global setup is bound to have a trickling down domino trail of blowing up various countries' GDPs. Following this, Sachchidanand Shukla, the chief economist of Mahindra Group in his statement to a financial daily regarding the India's international trade scenario, further elaborates that India’s 84% imports of the sunflower oil are sourced by Ukraine, with upto 13% of our nation's tea exports being sourced to Russia. This fluctuation in the global trade disrupted by the conflict could only lead to further inflation in the retail sector.
However, we need to also note that the two countries in conflict hold a comparatively smaller share in the foreign trade scenario of India to affect the country’s economy permanently. However, crude oil prices have jumped to around $120/bbl due to this conflict. The rise in the crude oil prices, which turns out to be the core of inflation, is the concern in hand for our nation.
The challenge now is to understand, with the advances being made by the West to corner the Russian trade scenario, how will the Indian economy fit with their neutral stance. The possibility of some sectors getting into serious difficulty is not too thin any more.