A report by the SBI (State Bank of India) economists shows that the ongoing conflict between Russia and Ukraine has a high possibility of impacting specific high-frequency indicators such as the financial markets, exchange rate and crude prices in the short term.
The finance minister said, “India’s development is going to be challenged by the newer challenges emanating in the world.
Peace is being threatened, and after the Second World War, a war of this significance, this impact on the globe probably is not felt.”
It has also been found in a recent development that India’s top lender SBI will not process any transactions involving Russian entities, which is subject to sanctions imposed internationally on Russia.
Nirmala Sitaraman also reassured that the government was closely monitoring the situation in Ukraine.
Due to insurance risk, India’s Oil Corp (IOC) said that it would no longer be accepting cargos of Russian crude and Kazakh CPC Blend cargos on a FOB (free on board) basis.
In between all this, the crude oil prices soared past $100 per barrel, chasing uncertainty in global supply disruptions.
However, India could also be one of the downright impacted countries as it imports 80% of its crude oil from other countries.
This is an overview of how the different sectors can be impacted: –
BANKING
The Banking sector has remained buoyant to the Russia-Ukraine crisis so far.
Banks’ profitability has risen to a new peak along with asset quality, profitability, and capital adequacy in Dec ’21 quarter. The YTD FY22 has also been seen touching new highs.
Apart from this, the SBI report showed that there is an appropriate cash balance of Rs 2.8 lakh crore and adequate liquidity of Rs 7 lakh crore.
TRADE
India performs trade deficit with Russia, with imports increasing while exports are declining. In FY22, the report said that 2.8% of our total imports had been imported from Russia.
A significant part of our import basket from Russia is formed by oil, whereas electrical machinery and equipment are highly exported to Russia.
However, Russia is our 25th top trade partner, as the total trade is not that much, with Russia’s share being only 1.3% of the total trade.
The impact on the economy through the higher commodity prices impacting our inflation and CAD would be limited along with the impact through the trade channel.
GDP
SBI report has expected negligible impact of the Russia-Ukraine crisis on the Indian Economy, with limitations on trade, banking and corporate.
The report added, “The economy seemed poised to enter a high growth, I.e., 9.2% in FY22 over –6.6% in FY21 and low inflation, I.e., 4.5% in FY23 vs 5.3% in FY22, phase.”
Also Read:-India’s June WPI Inflation at 15.18%
Edited By : Amisha Rampal
Published By : K. Bindhiya Prarthana
