The Economic Impact Of The

Ukraine -Russian War On India

By Nandika Agarwal
Class 11C
Roll no -15
Subject - Economics

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 Session – 2022-23

ACKNOWLEDGEMENT
I would like to thank my teacher, Mrs Vaswati Samanta for providing me with the wonderful
opportunity to do this project on this topic which also helped me do a lot of research. I'm
grateful to her for teaching me so many new things. In addition, I'd like to acknowledge my
parents' support and consideration, who have always been present in my life. Their valuable
advice and feedback assisted me in finishing this project. The project also assisted me in
conducting extensive research, and I learned a great deal about the topic on economic impact
faced by India due to the Ukraine-Russia war.

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 CONTENTS
1. INTRODUCTION
2. OBJECTIVES
3. SUMMARY OF THE IMPLICATIONS OF THE WAR
4. NEGATIVE ECONOMIC IMPACT
5. POSITIVE ECONOMIC IMPACT
6. CONCLUSION
7. BIBLIOGRAPHY

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 INTRODUCTION
On February 24, 2022, Russia launched war
against Ukraine. The largest military assault
on a European nation since World War II, it
is regarded as an act of aggression
internationally. Since the outbreak of war, it
has triggered Europe's biggest refugee
crisis, resulting in millions of displaced
people and the migration of approximately
3.8 million Ukrainian residents. The world
economy has been seriously affected by the
war between the two neighbouring
countries, which has a negative economic
impact and a high inflation rate. As a result
of this crisis, the global economy has
experienced slower growth and higher inflation.

The two countries that produce the most

commodities, in particular oil, are Russia and
Ukraine. Without a doubt, the war would drive up
costs everywhere. With wheat, which Ukraine and
Russia generate 30% of the world's exports of,
food prices have increased. Petroleum importers
like India, ASEAN nations, and several pacific
island economies will have the most impact on
current accounts. As the Ukraine war raises the
cost of fuel and edible oil, the majority of Indians
are consuming less fried food and even vegetables. Since the conflict between Russia and
Ukraine started, businesses have increased fuel prices, and consumers are starting to feel the
pain. Due to this, the cost of vegetable oils, diesel, and petrol has increased significantly.

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OBJECTIVES
 To identify the factors that have an impact on the Indian economy.
 To conduct a thorough examination of each factor influencing the Indian economy.
 Identifying opportunities from which India would benefit from Russia Ukraine War.
 To examine the impact of the war on India's trade relations and economic
development.

Summary of the implications of the War

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  Russian invasion would put India under pressure to choose
between the Western alliance and Russia.

 India's national interests are served by maintaining strong

relations with Russia. As a result, India must maintain a
strong strategic alliance with Russia and cannot participate
in any Western strategy aimed at isolating Russia.

 The possibility of US CAATSA sanctions against India as a result of

the US-Russia S-400

 A pact may have an impact on Russia's relations with China.

This may allow India to step up its efforts to re-establish
relations with Russia.

 Ukraine's problem is that the world is becoming more

economically and geopolitically interconnected. Any
improvement in Russia-China relations affects India.

 There is also a consequence on the region's large Indian

diaspora, threatening the lives of thousands of Indian
students.

 Increased uncertainty dampens the outlook for inflation and growth.

 Rapid capital outflows in the short term - India is the second-most impacted country
year to date.

 Strong depreciation pressures on the domestic currency -

India is the second-most impacted country year to date.

 Rising import bills and a current account deficit may

have an immediate impact on reserves.

 The RBI may be forced to raise policy rates sooner and

support the domestic currency.

 Russia and India have long had economic and military ties.
However, over the last two and a half decades, the United States has emerged as the
most important trading and investment partner. If the US decides to impose sanctions
on Russia, India will face difficult challenges in managing the relationship.

Negative Economic Impact

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Liquidity Crisis
The Russian-Ukrainian conflict has made the
Indian economy's liquidity crisis worse. Due in
major part to the epidemic, there is now less
access to liquid cash, which has decreased
consumer spending. Due to the likelihood of low
returns, major corporations are reluctant to invest
money in the market, and people are reluctant to
spend money since they have restricted access to
cash.

Rising Inflation
A rise in global crude oil prices will result in
higher domestic inflation in Indian markets.
According to the RBI, inflation will be 4.5% in
FY2022-23. Rising metal, fuel, edible oil, and
other commodity prices are early indicators of this
trend. Furthermore, rising consumer inflation can
halt discretionary consumer spending and
investment. This is also expected to increase the
current account deficit, weakening the rupee's
value in relation to the dollar.

Reduced GDP
War had a significant impact on commodities in
India, particularly energy, which is a major source
of concern for the Indian economy.
Rising petroleum prices invariably result in a
depreciation of the rupee, an increase in inflation
and the fiscal deficit, and a slowing of GDP growth.
GDP will fall by 20 basis points as a 10% increase
in petroleum is expected, inflation will rise by 40
basis points, and the current account deficit will
widen by 30 basis points. Fortunately, the Indian
economy can withstand the agony of rising oil prices
and the disruption caused by the Russia-Ukraine
conflict. Growth will undoubtedly slow, but the
slowdown will be manageable. The withdrawal of
monetary support by central banks worldwide will
be handled with extreme caution.

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Significant Outflow in Foreign Investment

 All of this could have serious

consequences for India's balance of
payments. Because of the inelastic nature
of energy demand and the country's
current difficulties with coal imports,
any further increase in crude oil prices
will invariably result in higher import
bills. If the conflict continues, the current
account deficit will worsen.

 This problem is more acute in India because the country is experiencing one of the
largest outflows of foreign institutional investors in the first quarter of 2022. The
looming threat of a US Fed rate hike makes the Reserve Bank of India's task
extremely difficult. This will also have an impact on the exchange rate. The rupee was
not subjected to abnormal pressure as a result of prudent policies and a forex
management strategy.

 On the other hand, the change away from dollar-based trade and finance may quicken
if other trading partners of Russia switched to their own currency-based trade, like the
Indian rupee-Russian ruble agreement, and if an alternative to bank transactions, like
SWIFT, could be developed. These kinds of changes following the crisis between
Russia and Ukraine may have an effect that extends much beyond India.

 In the near future, volatility is the most likely prospect. As the country begins to
recover from the pandemic-induced economic slowdown, the public and private
sectors in India will need to work together to address legacy issues such as energy
security, inflation, and resilience. Supply-side shocks, demand fluctuations, the course
of the conflict, and the extent of global sanctions will all have an impact on the Indian
economy's future, while also opening up new opportunities.

Fall in Rupee
Since the start of the war, currency markets around
the world have been extremely volatile. Currency
depreciation has occurred as a result of a
combination of war and sanctions, and the rupee
has not been spared. This comes as the current
account balance has turned negative, and with
rising oil prices, a stronger CAD is expected.

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Positive Economic Impact
Jump in Defence Sector
Russian arms exports to India total 25% annually. The Indian defence industry will probably
gain traction because the Russia-Ukraine conflict isn't close to having a tangible settlement.
Russia supplies 86% of India's weapons. The United States is on the other side. In December
2021, India and Russia signed a military technology cooperation agreement. This agreement
includes orders for military platforms totaling more than $ 9 billion. In October 2018, India
agreed to purchase five S-400 surface-to-air missile systems from Russia for $5 billion. One
of the five units has already been delivered to Indian Airlines. The war between Russia and
Ukraine may cause a delay in the supply of military weapons to India. India allocated $70.2
billion for military spending in its union budget for 2022-23, an increase of nearly 10% over
the initial allocation in the previous fiscal year. This would result in the defence industry
growing at an unprecedented rate and offer lucrative investment opportunities to retail and
institutional investors. According to a congressional research service report from October 21,
the Indian military force cannot function effectively without Russian-supplied equipment.
The Indian Army's main battle tank force is dominated by Russian T-72M and T-90S tanks,
which account for 66% and 30% of all units, respectively. Despite the US threat of sanctions
over the S-400, India will continue to rely on Russian weapons systems in the medium term.

Favourable movements in commodities that India exports:

 Russia and Ukraine are both major grain
producers and exporters around the world, and
as a result of the conflict, exports of such
commodities have been halted, creating a
potential market vacuum. For example, Russia
and Ukraine are two of the market's leading
wheat producers, but due to war, wheat supply
is being disrupted, so India is filling the void
by increasing wheat exports.

 Wheat from Gujarat, Rajasthan, and Uttar Pradesh is being delivered at Rs. 2,400 to
Rs. 2,450 per quintal, as opposed to Rs. 2,100 per quintal or so in the previous 15
days. The only thing to remember is that the Indian government must carefully
manage both India's overall domestic stock availability and exports. Edible oil,
vegetable oil, and oilseed prices are also skyrocketing.

 There is also the possibility of a benefit for mustard oil growers in Rajasthan and
Uttar Pradesh, who are planning to market their crops in the coming weeks. At the
moment, mustard prices are above Rs. 6,500 per quintal, which is higher than the

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 minimum support price of Rs. 5,050 per quintal. Cotton prices are also rising as
synthetic fibre becomes more expensive. Brent crude oil is a major factor in raising
the prices of the commodities mentioned above, as well as other commodities. India
must carefully observe and analyse the current situation before acting, so that there is
a possibility of a favourable outcome in many areas as a result of the ongoing conflict.

Potential Opportunities for India:

 During the conflict the United States and its

many ally-based organisations decided to
cease operations in Russia. SWIFT (Society
for Worldwide Interbank Financial
Telecommunications) During the conflict,
the United States and its many ally-based
organisations decided to cease operations in
Russia. SWIFT (Society for Worldwide
Interbank Financial Telecommunications),
an international organisation with more
than 200 countries and 11000+ banks worldwide, decided to cut ties with Russia after
handling more than 4 crore transactions in a single day.

 This situation has created a void that can be filled by India's own UPI (Unified
Payments Interface). UPI usage has increased significantly in recent years, and UPI
has progressed to the point where digital payments can be made even without access
to the internet. In the fiscal year 21-22, UPI transactions surpassed $1 trillion. If UPI
can fill such a void and replace SWIFT in the Russian market, it will be a significant
step forward for India in the finance sector.

 Nepal also adopted UPI for peer-to-peer payments, assisting its businesses in
growing. NPCI (National Payments Corporation of India) must onboard as many
people and banks as possible as soon as possible because India must become a
superpower without relying heavily on weapons. In addition, RuPay card was recently
launched in Nepal, following Bhutan, Singapore, and the United Arab Emirates. If
India takes this to the next level and on a larger scale, it may be able to capture such
markets in larger countries such as Russia as well.

 The aviation industry is also grounded in

Russia, as a large number of aircrafts may
be on lease agreements that are suspended
or insurance coverage is halted as the home
country is determined to make the sanctions
hurt. India may assist its ally by sending in

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 some aid and thus establishing itself in such industries, leading to an increase in forex
exchanges and revenues from such operations.

 In order to further their education,

India sends a large number of
students to Ukraine and Russia. This
demand should be directed toward
expanding our educational system.
Currently, billions of dollars in
foreign exchange are being used to
pay for education in other countries.
Instead, we have the opportunity to
broaden the scope and size of the
educational sector.

CONCLUSION
Thus, from the given data we come to know about the various economic problems faced by
India due to the cold war between Russia and Ukraine. The war not only led to negative
impacts on the economy of India but there were also many positive effects on Indian
economy. Given the disastrous short-term effects that started to materialise within hours of

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Russian military taking Ukraine, India's long-term fate in the middle of the ongoing turmoil
international waters is mostly uncertain. The nations may be thousands of kilometres apart
geographically, but due to their shared geopolitical and military rivalry, they are close in
proximity. If the Ukraine crisis worsens, the stock market is likely to suffer significant losses,
as oil prices are expected to remain high. While the Federal Reserve of the United States will
meet next month to consider raising interest rates and tightening liquidity, it is expected that
the Fed will not take any aggressive action. Another source of concern is the impact of rising
crude oil prices on the Indian economy, which comes at a time when inflation is near 6%,
which is significantly higher than the Reserve Bank of India's upper limit. Some positive
effects were jump in the defence sector, favourable opportunities to rise in industrial and
educational sectors.

BIBLIOGRAPHY
 The good and bad effects of the Russia-Ukraine war on India regarding commodities.
Edited By: DNA Web Team, Source: DNA Web Desk, Updated: August 21, 2022.
 How Russia's war in Ukraine Rocked the Global Economy-The Economic Times 23
March , 2022.
 Russia-Ukraine War To Strain Multiple Sectors of Indian Economy – CRISIL Money
life Digital Team, August 20 ,2022.

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 Indian Titans Belts as Ukraine War Drives Up Prices of Necessities published in The
Hindu on 24 August , 2022
 How Will The Russia- Ukraine War Impact The Indian Economy – Mimamsa Verma
- financial Economy August 23, 2022.
 Times of India - https://timesofindia.indiatimes.com/business/india-business/impact-of-
russia-and-ukraine-war-on-indian-econombyajayamarassociates/articleshow/92273933.cms
August 22, 2022.

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