9 Reasons Why Ukraine-Russia War Directly Impacts India

How Ukraine-Russia conflict affects you financially, even though you are thousands of miles away from the war?
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Ukraine-Russia War /P.C. FT.com
Ukraine-Russia War /P.C. FT.com

In the year 1956, when the world was divided between two opposite ideologies, Jawaharlal Nehru, the then Indian Prime Minister, stood tall, away from the warring camps. This was known as the Non-Alignment Movement, for which India was known globally in those times. It was a group of countries that chose not to join any faction of the Cold War era.

But during that time itself, there happened an incident that greatly impacted this image of Mr. Nehru and India. When the then USSR invaded Hungary as a reaction to the Anti-Stalin revolution in that country. At that time, India chose to abstain from voting, although it had voted against Britain’s invasion of Egypt in the Suez Canal Crisis in the same year. This showed India as a Hippocratic nation in terms of its policies of Non-Alignment.

Now, after 66 years, Mr. Modi again repeated the same policy in the Ukraine Crisis.

But today the world is different. Today, we not only make a choice whenever something happens in far corners of the world, but we also pay for the choices in an interconnected global supply chain. Incidents on one side of the planet impact the life of a common man on the other side. You may not realize this but in this Ukraine-Russian Conflict, you are also paying an indirect tax associated with the war.

Here is me telling you, how Ukraine-Russia War is affecting your pocket and your future prospects.

Diplomatic Challenge for India in Ukraine-Russia War

India is a country with a surplus of labor. It can export this surplus to countries, which in turn can give us the wealth, we require so much to achieve double-digit growth. 

But in the present situation, this give & take is impacted by where we stand and with whom we stand. 

Export of labor, unlike goods, requires harmonious relations with countries, for the free movement of people. But it becomes complicated when countries do not stand on the same side.

Fuel prices and the War

This conflict has caused a sharp rise in international crude oil prices due to the looming uncertainties. Now, the crude oil prices are nearly touching $ 120 per barrel. 

This is not at all a surprise, as Russia controls 40% of European gas supplies and 10% of global oil production.

This, for a country like India, which is import-dependent for its energy supplies, becomes a major drain on its wealth. There are some reports coming about the ₹ 12 hikes in petrol-diesel prices as the elections come to an end.

Inflation vs Recession

To boost the pandemic recovery, nearly all the Central Banks have decreased the lending rates. This was done to boost the demand & investment and jump-start the economy. But lower lending rates also mean higher inflation, as people have more money, putting pressure on supplies. 

This war has spiked this inflation to new heights. Now, every Central Bank has to make a choice between controlling inflation & fighting the recession. How this is gonna affect the common man is elementary economics.

Free fall in the value of Rupee

Being the biggest import commodity, the price of crude oil also controls India’s forex reserves and the value of the Rupee.

Rising fuel prices have now caused slippage in the value of the Rupee against the Dollar. All this makes imports costly, which will ultimately be passed upon the common man, like the price of fuel.

Chip-Shortage

Do you know Russia controls 44% of global palladium supplies and Ukraine produces 70% of neon supply, both of which are used in chip making?

Chip shortage was already a big problem before the war due to pandemic, but, now there are predictions coming that this shortage scenario is going to be severe.

For India, this means lower production in electronic and automobile industries and resultant loss of employment & exports.

Rising Steel Prices & its Impact

In the past few days, the domestic prices of Steel have jumped 5000 per ton and are expected to rise more in the coming days, according to industry experts reported of the Mint.

Steel is an important capital good that impacts the overall production in any economy and finally the growth of the country.

Therefore, this problem may cause a revision in terms of economic growth predictions, which for a common man means loss of expected income.

Wheat Exports from India

According to the Reuters report, the Ukraine-Russian Conflict has caused a supply-side issue in the global wheat export supply chain. Both the countries together contribute 29% of total wheat exports. The biggest gainer here is China.

This, for India, may act as a silver lining, as the rise in prices of wheat makes Indian exports more competitive. In the coming days, we may see an increase in wheat exports. This may provide some cushioning effect in the rising fuel prices scenario for the Indian forex dilemma.

Indian students in Ukraine

For the past few days, news about Operation Ganga is going on 24×7. How heroically India is bringing back its students from the war-torn country, and stories of mismanagement are in abundance, based on which side of the political spectrum you are on.

But, for those who are returning to the country safely, an uncertain future awaits in the shadows.

Defence Supplies and Sanctions

Russia is India’s biggest defense equipment supplier. India and Russia have jointly developed defense weapons such as the Brahmos missile. Russian supplies of the S400 Anti-Missile System are due, which is very necessary for our national security. But this conflict has increased the risk of US sanctions on India for trading with its adversary countries.

Conclusion

Finally, you may cheer for one side or the other, but violence, in the present world order, is not contained to your Twitter feeds. You may not realize it, but as Twitter is impacting your emotional and mental well-being, this war is impacting your financial well-being.

Peace will not only bring relief to the citizens of Ukraine, but to each and every individual on this planet. 

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