Students evacuated from war-torn Ukraine bursting into tears after reuniting with their families in Gujarat is just the tip of the iceberg of the far-reaching effects Russia’s war against its neighbouring nation will have on India. Experts feel the economic fallout will have a lasting financial impact on Gujarat especially. From the availability of food to the cost of energy and petrol – the effect will be felt far and wide.
Ukraine alone makes up nearly half the exports of sunflower oil. If harvesting and processing processes are hindered in Ukraine, or if exports are blocked, importers will struggle to replace supplies. Former Cabinet Minister of Gujarat Jaynarayan Vyas explains how the aam janta’s monthly budget will take a huge hit.
“Over 70% of India’s crude edible oil demand is met through imports. For sunflower oil, the share is even higher. This will lead to a ripple effect in Gujarat. Companies in the state will be left with not many options but to consider hiking prices of daily consumed edible oils within weeks.”
Finance Minister Nirmala Sitharaman also pointed out on Monday that Ukraine is a major supplier of sunflower oilseeds and fertilizers, and the disruption in supply would impact essential commodities like edible oil. She added, “But you can be assured that we are fairly seized of the matter in its granular form because it’s going to have an impact on the essentials which come.”
With oil prices crossing the $100 per barrel mark, there may be an impact on the overall economy too, in terms of the cost of manufacturing and supply chain. Oil companies may be forced to revise prices of petrol and diesel upwards and March may see a sharp jump in their rates.
| Sr No | Major imports from Ukraine |
| 1 | Petroleum products |
| 2 | Precious metals |
| 3 | Edible oil |
| 4 | Raw materials for defence |
| 5 | Gas |
| 6 | Fertiliser |
Gold, diamond prices to escalate
Sunil Dave, founder of BC Instruments India Pvt Ltd, and president of Indo American Chamber Of Commerce said that the demand for gold is also likely to increase leading to its increased import.
“There are fewer short-term impacts but in the long term, prices of gold are bound to increase. As oil prices rise, we may see an increase in inflation in India and this can make staple items such as vegetables, fruits, pulses, oil etc a bit expensive,” said Dave. According to the Reserve Bank of India’s analysis, every $10 rise in crude prices adds about 0.5 per cent to inflation.
India and Ukraine have trade relations. Fuels, mineral oils, pearls, valuable or semi-precious stones, nuclear reactors, boilers, machinery, and mechanical appliances are the most common imports. Between April and December 2021, Ukraine’s major exports to India were vegetable fats and oils (73.3%), fertilisers (10.6%), nuclear reactors and machinery (5.2%). Prices of fertiliser are also likely to increase in the long run. Farmers may get the brunt of the situation.
Gujarat imports 29% of its rough-cut diamonds from Russia and due to the conflict situation, the diamond prices and its manufacturing units in Surat might see an impact in the near future, emphasised Dinesh Navadiya. President, Surat Diamond Association.
Gold is usually considered as a hedge against inflation. The yellow metal gained about 6.3 per cent this month amid escalating tension between Russia and Ukraine. The Bank of Russia announced that it will start buying gold again, nearly two years after it had ended a long run of purchases.
Entrepreneur Bharat Gandhi, who heads the Federation of Indian Art Silk Weaving Industry (FIASWI), said, “For the textile industry, there will not many short-term effects as Gujarat has minimal business with Russia and Ukraine in terms of cotton, jeans and textile. In the long run, however, if the overall logistics sector is impacted due to the increase in fuel prices, then the textile industry will be hit and manufacturing prices are sure to increase.”
