Its impact on India and how prices of commodities will be affected

After days of heightened tension, Russia on Thursday ordered ‘special military’ operation in Eastern Ukraine’s Donbas. Announcing a special military operation in Ukraine earlier in the day, Russian President Vladimir Putin had said that the motive behind it was not to ‘capture’ the Eastern European country but just to ‘demilitarize’ it. His counterpart Ukraine’s Volodymyr Zelenskyy has, however, claimed that ‘demilitarization’ was just an excuse, the plan was to capture not just Eastern Ukraine but more. If so happens, and there breaks out a full-scale war, what would it mean to India?

What does the Russia-Ukraine war mean to India?

The Ukraine-Russia crisis has pushed Brent crude oil price to $96.7 per barrel, the highest it has been since September 2014. Russia contributes a lot to crude oil export and their invasion of Ukraine might call up for sanctions from different countries and that will further fire up the rising crude oil prices. The current crisis can lead to prices shooting up to more than $100 per barrel in the days to come.

India, which imports about 80 per cent of its energy needs through oil imports could be one of the worst affected nations in this crisis. Rising energy import prices will also lead widen the country’s current account deficit.

  • Higher electricity bill

The rise in energy prices will also lead to a surge in prices of electricity production, which in turn will lead to higher electricity bills for consumers.

  • Sunflower oil price likely to soar

India imports about two lakh tons per month of sunflower seed oil and at times it goes up to three lakh tons per month. Ukraine is the primary supplier of sunflower oil, the second and third in line being Russia. If tensions further heighten, chances are that Russia may block Ukraine’s shipments. Also, if there are sanctions on Russia, then it will be double the trouble for India, for the country will be able to import oil from neither of the two countries- the only option remaining Argentina. India is dependent on edible oil imports to the tune of about 60 per cent, so prices are bound to rise.

Another essential commodity that is set to be adversely impacted by the war is wheat. Both Russia and Ukraine are two of the world’s largest wheat producers and account for about a quarter of the crop’s global production.
Any disruption in the global supply of the crop due to war can lead to a steep surge in food prices.

  • Price of metal products to go up

Russia is the largest exporter of palladium, a metal used in a range of products from mobile phones to automotive exhaust systems. Any disruption in the supply of the metal due to sanctions could lead to a huge disruption in the supply chain of these products, pushing their prices up.

  • Derailing of Indian Rupee

The Russia-Ukraine border conflict could derail the Indian rupee’s stable outlook. As the fear of Ukraine’s invasion by Russia loomed in the past week, global markets were rattled. With the latest escalation, it is likely to hurt further. The Indian market too saw the effect of the ongoing war as the market crashed in the opening hours of Thursday. Sensex was down by more than 1400 points where Nifty 50 tumbled by more than 2.5%. The major reason for the crash was the fear amongst the investors as they started dumping their holdings.

  • Delayed in delivery of orders including S200

Not to forget, the Russia-Ukrain will majorly affect the many deals India has entered into with the former. There will be sanctions on Russia which will impact the delivery of S-400 missiles to India, to name a few.

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