Indian economy on edge by Russia-Ukraine crisis, Economic growth likely to slow down
India’s relation with Russia on both key fronts - military and trade – have always been very sustainable and therefore it is highly unlikely that sanctions on Moscow would not impact New Delhi in a major way.
Winning Bizness Desk Correspondent
Mumbai. Almost every market experts believe that the ongoing Russia-Ukraine battle will have an adverse impact on many Indian sectors, including oil & gas, auto and defense. Repercussions on financial markets, crude oil and supply chain are already visible experts are of the view that it is highly unlikely that Western sanctions on Moscow would not impact New Delhi in a major way. More importantly, finance minister Nirmala Sitharaman has also recently said that the government is worried about the impact of the war between Russia and Ukraine on India’s trade with the two countries, adding that the issue was being studied in detail.
Economic growth likely to slow down: Expert
Well known economist Mr Kirit Parekh said that already crude oil prices have touched $100 per barrel even before Russia's invasion of Ukraine. Now, after the Russian invasion, crude oil prices are under more pressure and they are likely to remain at high levels for a long time to come. This, Mr Parekh said, will have an impact on the country's import bill and if this happens, then in the long run the country's economic growth is also likely to slow down, he noted. At the same time he said that prices of other commodities which India imports, too will rise in the international market. “Due to this pressure on the global economy, demand may be impacted which could affect our exports too,” Mr Parekh observed.
USD 8.1 billion trade with Russia
According to the commerce ministry data, India’s trade with Russia during 2020-21 amounted to USD 8.1 billion. India’s exports stood at USD 2.6 billion, while imports from Russia amounted to USD 5.5 billion. Notwithstanding economic and military sanctions slapped on Russia by the US and its allies, such restrictions are not binding on India directly as New Delhi is not a member of blocs such as the NATO or the European Union. But with Russia now facing an axe from European countries, India’s trade ties with Moscow will certainly find hiccups in the near future.
Energy, Auto and Defense to be Worst affected
The automobile sector is also going to be impacted by the Russia-Ukraine crisis and resultant sanctions on Moscow. Russia and Ukraine are both key sources in the auto industry’s supply chain, particularly for semiconductor manufacturing. They are also providers of critical gases and rare earth metals. Among the major Indian sectors that are expected to be hit by Western sanctions on Russia are energy, auto and defense. Besides, India is the world’s third-largest importer of oil, and has consistently been sourcing crude oil from Russia. The Indian government had signed a contract in 2020 for Russian crude oil. Several state-run energy firms have invested in Russian oil and gas blocks. ONGC Videsh Ltd (OVL), Indian Oil Corporation (IOC) and Oil India Ltd (OIL) have invested in Russian oil and gas projects.