Impact of UKRAINE RUSSIA WAR IN INDIAN ECONOMY: UPSC Daily Important Topic| 24 March 2022

Impact of UKRAINE RUSSIA WAR IN INDIAN ECONOMY

✓The Russia-Ukraine crisis will send cooking gas, petrol, and other fuel bills soaring for Indian households and businesses. Higher oil prices add to freight/transportation costs.

✓Depending on how long global oil prices remain elevated, the tensions could raise questions on the RBI’s credibility in making inflation projections and upset the government’s budget calculations, particularly fiscal deficit.

✓The surge in crude oil prices will lead to an increase in India’s oil import bills, and gold imports could jump back up, keeping the rupee under pressure.

✓India’s imports of petroleum products from Russia are only a fraction of its total oil import bill and, thus, replaceable.

✓However, getting alternative sources for fertilizers and sunflower oil may not be as easy.

✓Exports to Russia account for less than 1% of India’s total exports, but exports of pharmaceuticals and tea could face some challenges, as will shipments to CIS countries. Freight rate hikes could make overall exports less competitive too.