Impact of Russia-Ukraine war on Indian Economy

Contact Counsellor

Last Updated25/02/2022

India is not party to this external event and is not impacted directly
Its medium- to long-term economic prospects are not altered due to it
The markets will likely remain volatile in the near term in line with geopolitical developments
But there are also concerns in place for India regarding this aggression between two countries

Oil prices: Brent crude shot past the $100 per barrel mark for the first time in eight years on concerns over supply.
As Russia is the world’s second largest oil producer.
Rising oil prices could speed up already rising inflation.
India imports more than 80% of its oil requirement, but the share of oil imports in its total imports is around 25%.
Current Account Deficit: it will also impact the current account deficit, which is the difference between the values of goods and services imported and exported.
Commodities price: sanctions on Russia by the West could impact its trade with the world
It will result in a rise in the prices of other commodities and products, including wheat, edible oil, and metals.
India imports most of its requirement of sunflower oil from Ukraine

India’s economic fundamentals remain strong and the war will not have a significant impact on the economy.
There is a view that with the third wave of Covid close to its end and most restrictions having been withdrawn
There will be an uptick in consumption and domestic growth which will quicken the pace of recovery.

Geopolitical concerns have intensified the outflow of funds over the last two months.
FPIs pulled out a net of Rs 6,448 crore from Indian equities
It led to the fall in the markets.
This outflow is likely to continue over the coming days.

Domestic institutions emerged as net investors as FPIs pulled out from the market
According to provisional data released by the stock exchanges, DIIs invested a net of Rs 7,667 crore which is more than what the FPIs pulled out.
The current geopolitical concerns will not impact long-term fundamentals and prospects of businesses

When equities have been falling, gold has risen sharply.
The price of gold jumped 3.3 per cent recently
A report by Motilal Oswal Financial Services said gold prices are likely to rise further from current levels, as investors will move towards the safe haven following inflation-related concerns on higher crude prices and geopolitical tensions.