100 Days of Russian-Ukrainian Crisis: Here’s How Commodities, Markets and the Economy Were Hit

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It has been almost 100 days since the Russian-Ukrainian war tainted the Indian economy. With the invasion, commodity prices rose, and with it the annual inflation rate rose to 7.8% in April this year, the highest since May 2014. Vanaspati oil, wheat, mustard oil and sugar were the products most affected by this crisis.

The price of Vanaspati oil on May 31 this year was 26.6% higher than the same day in 2021, while wheat was 14.3% higher. Mustard oil and sugar prices were 5.1% and 4.1% higher than on the corresponding day last year.

As if rising commodity prices weren’t enough, rising crude oil prices only exacerbated the already deteriorating situation. At the start of 2022, Brent prices stood at around $80 per barrel. Shortly after the Russia-Ukraine crisis hit the global economy like a thunderbolt, Brent reached $128 a barrel. Crude oil prices hit a new high, with Brent hitting $122.8 a barrel on May 31.

Markets have also been heavily impacted by the ongoing standoff between Russia and Ukraine as Foreign Portfolio Investors (REITs) pulled out of Indian markets for more than Rs 1 lakh crore in the three months since. followed the start of the stalemate, which was Rs 50,000 crore more than the combined drawdown of the previous nine months.

Another cause of sell-offs by foreign investors in Indian markets is monetary tightening in the world due to inflation. The withdrawal of foreign portfolio investment (FPI) caused the Indian rupee to depreciate against the US dollar. The rupee depreciated by around 4%, from 77.53 against the US dollar on February 24, when the war began, to 77.7 against the dollar on May 31. The weak Rupee has also had a negative impact on imports, especially oil imports.

India’s GDP figures have also felt the impact of the ongoing war between Russia and Ukraine. Experts believe that inflation will be a lingering problem for some time and the economy has been grappling with a price spike for some time now.

Deloitte India economist Rumki Majumdar told the PTI news agency: “Government intervention in the form of import duty cuts, fertilizer and cooking gas subsidies, tax on fuels to protect customers and businesses from high inflation is likely to have an impact on the budget deficit in the coming quarters.

While the Indian government’s chief economic adviser, V Anantha Nageswara Rao, acknowledged increased inflation, he completely ruled out stagflation. The CEA told Reuters that “inflationary pressures will remain elevated.” Stagflation refers to a situation in which a country’s economic growth slows, demand weakens, and unemployment rises despite rising inflation.

(With IUD, contributions from the agency)

Also Read: Analysis: Private Indian Refiners Mining Cheap Russian Crude as State Refiners Suffer

Also read: Russia accuses US of adding fuel to fire by supplying Ukraine with rockets

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