HPAS/Allied Mains 2022 Answer Writing Challenge Day 26: Model Answer
Question: Discuss in brief the economic effects of the Russia-Ukraine conflict on India? (8 marks, 120 words)
- The Russo-Ukrainian War is an ongoing war between Russia (together with pro-Russian separatist forces) and Ukraine.
- It was started by Russia in February 2014 following the Ukrainian Revolution of Dignity, and initially focused on the status of Crimea and the Donbas, internationally recognised as part of Ukraine.
- Following a Russian military build-up on the Russia–Ukraine border from late 2021, the conflict expanded significantly when Russia launched a full-scale invasion of Ukraine on 24 February 2022
Effect on India
- The invasion increased the cost of necessities, which also caused the annual inflation rate to increase for 3 consecutive quarters till September 2022.
- The price of Vanaspati oil on May 31 this year was 26.6 per cent higher than on the same day in 2021. The price of wheat rose 14.3 per cent, and mustard oil was 5.1 per cent more expensive than on the corresponding day in the last year.
- Crude oil prices scaled a new high with Brent crude reaching $122.8 per barrel.
- Markets have also been heavily impacted by the ongoing standoff between Russia and Ukraine as foreign portfolio investors (FPIs) pulled out over Rs 1 lakh crore from the Indian markets in the three months since the stalemate began, Rs 50,000 crore more than the combined withdrawal of the previous nine months.
- The rupee has dropped nearly 7% against the US dollar in the year to date, falling to a low of Rs 79.96 to a dollar last week and even breaching the psychological 80-mark in the over the counter and derivatives markets.
- More aid and global cooperation on logistics to avert a food crisis
- Targeted government support for households hardest hit by the rising cost of living
- Signals from central banks that they won’t allow inflation to spread
- US monetary policy can tighten faster as prices are driven by over-buoyant demand
- More solidarity in Europe on defence and energy spending
- Keep trade open to ensure diverse value chains for the green transition