The Russian invasion of Ukraine is not only causing havoc all around, but it has also started shocking the global economy. The effects of Russia’s attacks are being felt in the commodity, equity and currency markets, but the impact is unlikely to end there. This long-term effect depends on how NATO member countries, including the US, react to this crisis. India’s economy can also be affected by this. Here in this article, we will see how this war will affect the Indian economy.
A surge in fuel prices:
Russia is a major exporter of crude oil and natural gas in the world. If Western countries impose huge economic sanctions on Russian exports, it could lead to a huge increase in fuel prices. According to data from the World Bank’s WITS database, fuel-based goods account for more than 50 percent of Russian exports.
Data from the US Energy Information Administration (US-EIA) shows that Russia produces at least a tenth of global crude oil production. Which is almost half of the total crude oil production in the Organization of the Petroleum Exporting Countries (OPEC) in the Middle East.
Crude oil prices crossed the $100 per barrel mark for the first time since 2014, a direct result of Russian action. European countries are largely dependent on Russia for gas. There are apprehensions that its results may be visible for a long time. For example, Germany has blocked the approval of Russia’s Nord Stream 2 gas pipeline. Now due to the Russia-Ukraine crisis, not only will fuel prices increase, but it will also affect many other things.
For the domestic purpose, India imports 80 percent of crude oil which is 25 percent of India’s import bill. The increasing oil prices will increase India’s current account deficit. Besides, oil the LPG prices will also increase in the upcoming time. This will also increase the headline inflation in the country in near future.
Stock markets across the world felt the heat of this war, India is no exception. However, on the second day of war the Indian market bounced back. In a long run the war will have a negative affect on the market. Foreign investors are pulling money out of Indian market due to falling value of rupee. Moreover, the increased oil prices will have an adverse effect on stock market.
Will hit India’s tile industry:
One such bad effect is also going to be on the tiles city of Morbi of Gujarat. In most of the glittering tiles made in Morbi, bright clay from Ukraine is used. Wet and shiny soil from the land of Ukraine is very instrumental in the manufacture of tiles. In this way, the attack on Ukraine is going to have a direct impact on this business.
Will hit vehicle industry:
Russia is the largest producer of palladium. It is also used in petrol and hybrid vehicle exhausts, mobile phones, electric equipment, dental treatment, jewelry.
Palladium is a shining white metal. It is part of the group containing platinum, ruthenium, rhodium, osmium, iridium. It is found in large quantities in Russia and South Africa. It is extracted as a by-product of platinum and nickel. It is at the top of the world’s most precious metals. The main reason for this is the scarcity of this metal. Governments of all countries are getting strict regarding carbon emissions from vehicles. As a result, the demand for this metal has increased.
Impact on Indian export:
India earns a large sum of money from its pharma, tea, and food exports to Russia and Ukraine. The export will get beaten due to this war.