Russian Ukraine War and its impact on India

On 24 February 2022, Russia invaded Ukraine in a major escalation of the Russo-Ukrainian War that began in 2014. Banking, financial services, and insurance (BFSI) is the industry’s umbrella term for companies that provide a range of such financial products or services. This includes universal banks that provide a range of financial services or companies that operate in one or more of these financial sectors. BFSI comprises commercial banks, insurance companies, non-banking financial companies, cooperatives, pension funds, mutual funds, and other smaller financial entities.

The BFSI sector of any country is impacted by national macroeconomic factors and the global politico-economic scenario. In addition, globally disruptive events like the Covid-19 pandemic push the sector toward digital transformation and process innovation. And while such events are rare, their impact is lasting.

The Ukraine-Russia war is another such event that is presently leaving a marked impact on the Indian economy and financial system. Despite the neutral political stance maintained by India and only a limited dependence on Russia-Ukraine for imports (2.1%) and exports (1%), their conflict is affecting India’s GDP growth.

As global crude oil prices have skyrocketed due to the conflict, India’s macro stability is at risk, and GDP forecasts have been lowered to 7.9% for 2023 by Morgan Stanley from 8.2%.

The immediate impacts of this war on India’s BFSI sector are; A fall in the Euro, which impacts the rupee as well. The rupee declined to 65 levels against the dollar, This movement has impacted the cost of imports, including those of crude oil. As such, there is an impact on inflation and growth rates in India. The conflict has affected the trade and investment environment along the eastern periphery of Russia, the most important source of foreign trade for India. The government is actively working to ensure that the businesses run as normal. India’s exports to Russia are primarily agricultural commodities, grains, and oilseeds; whereas imports from Russia primarily consist of crude oil. Also, India maintains a high level of exposure to international financial markets. As such, besides indirect costs due to geopolitical factors, there is an actual cost in terms of capital and liquidity losses due to increased vulnerability in the event of crises in global markets. This is because India’s foreign exchange reserves are only marginally higher than short-term external debt. In addition, there is a potential threat to the stability of India’s financial market due to increased correlations between India and global markets. These factors impact the cost of capital, risk perception, and cost of funds in times of stress, which can push spreads higher, impacting profitability.

In addition to the direct ramifications of the Russia-Ukraine conflict on the Indian economy, there are also indirect impacts that have impacted operational efficiency in the BFSI sector. The quest for an alternate trading partner has led several Indian companies to increase their trade with Europe and East European countries such as Poland and Romania; these countries have active trade relations with Russia as well as with Ukraine.

Let’s face the fact now, Russia has overturned this war within hours in its favor, logically speaking on the Battlefield. First and foremost Russia is going to carry out Referendums in LPR, DPR, Zaporizhzhya & Kherson regions there is no doubt, but now these referendums are how accurate we cannot say, though now those regions according to Russia their territory. Second, As Ukraine attacks those regions, following the referendums Putin & Russia have got a Casus Belli also they will now have a claim stating that the western countries are attacking Russia via Ukraine & also conducting international Terrorism by recruiting mercenaries & sending cut-edge technology to these Mercenaries to fight for Ukraine, giving Russia the cause to use more deadly weapons Including tactical nuclear weapons. Third, We/The World is very clearly in the starting stages of the Domino effect which is leading up to a Global Conflict & very specifically a Nuclear war whether people like it or not, these are facts. Fourth, The west should think about what they are taking this world into, The first domino has already been pushed today and slowly the next dominos are collapsing.

Mobilization in Russia was announced only three times in the due course of History; July 18, 1914 (WW1), June 23, 1941(WW2), and September 21, 2022 (Russia VS NATO) according to Russia. It’s insane – Following Putin’s announcement of Mobilization Google search on “how to break your hand” skyrockets in Russia. More than 109 people arrested at protests against mobilization in Russia so far on Wednesday.

By Priyanshi Vijay