Geopolitical risks will push up India’s import bills for mineral oil and gas, gems and jewellery, edible oil and fertilisers.
Geopolitical risks will push up India’s import bills for mineral oil and gas, gems and jewellery, edible oil and fertilisers.
The ongoing crisis in Ukraine, given India’s import dependence on crude oil, natural gas, gems and jewellery, edible oils and fertilisers, is set to push the country’s import bills by over $600 billion this fiscal, leading to inflation. may increase. And the current account deficit, and the falling rupee, India Ratings warned in a report.
Geopolitical risks arising out of the Russia-Ukraine war will push up India’s import bill for commodities such as mineral oil and gas, gems and jewellery, edible oil and fertilisers, the rating agency said on Tuesday. As a result, merchandise imports could cross $600 billion in FY 2012, up from $492.9 billion in the first 10 months.
Its impact will be felt more on inflation, a widening current account deficit and a falling rupee, its chief economist Devendra Pant said in the report, adding a $5 per barrel rise in crude oil prices to trade/currently $6.6 billion. will increase. account deficit.
The impact of the Russo-Ukraine war on the domestic economy will be felt through higher global commodity prices (crude oil has boiled over, rising to $103.15 a barrel on February 27).
He said Sri Lanka, which is facing a foreign exchange crisis, is also likely to have some cascading effect on India.
Merchant trade with Sri Lanka peaked at $7.46 billion in FY20, and has since declined to $4.42 billion in the first three quarters of FY22.
Similarly, trade trade with Ukraine, which peaked at $3.11 billion in FY13, declined to $2.35 billion in FY2012, from $2.59 billion in FY2011.
India’s trade trade with Russia was slightly higher at $8-11 billion during FY2018-FY2011 and stood at $9.44 billion so far this fiscal.
In percentage terms, Sri Lanka’s share in India’s merchandise trade basket has been between 0.55 – 1.06% since FY 2005, Ukraine’s 0.24 – 0.42% and Russia’s between 0.79 and 1.39%, up from 0.79 and 1.39% now in this fiscal year. up to 1.27%.
Overall, the country maintains a trade surplus with Sri Lanka and trade deficit with Ukraine and Russia during FY 04-FY 2011.
The trade surplus so far this year with Sri Lanka stood at $2.88 billion and with Ukraine and Russia at $1.60 billion and $4.34 billion, respectively.
On the impact on inflation due to higher imported prices and a weaker rupee, the agency said a 10% increase in petroleum product prices without factoring in currency depreciation would lead to 42 basis points (bps) in retail inflation and 104 bps in wholesale inflation. Will be ,
Mr Pant said in the report that a 10% increase in the price of sunflower oil without factoring in currency depreciation would have the effect of a 12.6 bps increase in CPI and a 2.48 bps rise in wholesale inflation.
A 10% increase in the prices of these two items alone could push up retail and wholesale inflation by 55 bps and 109 bps, respectively.
Mr Pant highlighted fears that the conflict could trigger a flight of capital from emerging markets, resulting in a weakening of the rupee, but expects higher forex reserves ($632.95 billion as of February 18) to be substantially lower. Will provide a cushion till