Bracing for Impact

The Russian invasion of Ukraine has already creaked the world’s economy, and has the potential to do more damage if it doesn’t end quickly

- MANISH PANT AND TEAM BT

ON FEBRUARY 24, when Russian forces launched a war on neighbour Ukraine, it actually escalated an eight-year stalemate that commenced with Russia reclaiming the Crimean Peninsula in March 2014 to undo what it describes as a Soviet-era injustice. As news of the Russian move trickled in, stock markets tanked globally and in India. Oil & gas, metals, telecom and realty indices were the worst hit on Indian exchanges.

Of particular concern is the possibility of crude oil touching the 2008 high of more than $140 a barrel (currently Brent crude is at around $100plus levels). India is the third-largest importer of crude after China and the US; crude accounts for 20 per cent of the country’s total import bill. India paid $82.4 billion for crude oil imports in the nine months through December 2021, a 108 per cent rise over $39.6 billion paid over the same period in 2020. “Currently, the Ukraine crisis and its implications for crude have emerged as a key risk for [India],” says Dharmakirti Joshi, Chief Economist, CRISIL Research. “It will bloat the current account deficit (CAD), trim GDP growth and push inflation up, and the quantum of impact will depend on how high crude prices go and for how long they stay elevated.”