Russia’s invasion of Ukraine on Thursday rattled Indian industry leaders, who are now worried about the immediate and long-term fallout.
While those exporting their produce to Russia are concerned about the impact of war on their trade, others are worried about the soaring crude and commodity prices and their effect on the input costs.
In 2021, India’s exports to Russia stood at US$2.6 billion, while imports stood at $5.5 billion. Among the top export items, India shipped $469 million worth of pharma products and $301 million worth of electrical machinery to Russia. Other export items include tea, apparel and textiles.
Russia or the former Soviet Union used to be a major trading partner during the cold war era, but the trade volumes diminished after the Indian economy became more market-friendly and trade ties with the US and other Western countries improved.
Russia now accounts for only a 0.8% share of India’s exports, and 1.5% of its imports.
However, tea planters and exporters are concerned as shipments to Russia account for 18% of India’s tea exports. From January to November 2021, 30.89 million kilograms of tea was shipped to Russia.
They are worried about Western sanctions and uncertainty over the payment in dollars, and the disruption of shipments to Russia. They fear this will have an impact on the upcoming tea plucking season, which begins in March and continues till October.
Another concern is that a fall in the Russian currency will diminish the purchasing capacity of their buyers.
Indian industry leaders across the board are worried about the impact of the conflict on crude oil and commodity prices. They fear it will raise their input costs and stoke inflationary pressures.
Global crude oil prices have already crossed the $100 a barrel mark and trade costs are bound to rise. This will force manufacturers to increase prices as at some point they will have to pass on the rising input costs to customers.
Moreover, this comes at a time when the Indian economy is showing signs of recovery after undergoing a full-year contraction in 2020-21 due to the Covid-19 induced slowdown.