Russia-Ukraine war likely to hit Indian economy, here's what will get more expensive

The large-scale destruction caused by Russian forces in Ukraine has left the world horrified. According to experts, the war will ring the death kneel of the Indian economy, which will encounter turbulence in days to come.

Moving forward, petrol and diesel prices have increased by almost Rs.6 per litre over the last 10 days. From cars to vegetables and high fuel prices -- the common people are set to suffer the war's impact on the economy.

When common people spend more on petrol and diesel, they tend to spend less on other items of need. Once the nation cuts down spending, demand for goods and services will fall. This will hit construction, manufacturing and import ventures.

CARS TO BECOME EXPENSIVE:

Car manufacturers have announced a price increase from April 1 in view of high raw material and logistics costs linked to the current geopolitical situation.

An increase in the rates of materials for instance steel and aluminium, along with an increase in the costs of other raw materials, is also one of the reasons to the price rise.

From Tata Motors to luxury car makers, cars in all segments are set to cost more.

The supply chain across the Black Sea region has been impacted and the state of affairs continues to pose a threat to the auto sector.

Significant metals like palladium used in semiconductors are supplied by Russia, while Ukraine supplies special gases such as neon and helium needed for chip manufacturing.

Over the last few months, Maruti Suzuki, Tata Motors, Hyundai, and Honda have been registering a dip in production.The global crisis and rising fuel prices have led to cars becoming expensive for the consumer.

FRUITS, VEGETABLES, COOKING OIL PRICES:

Russia is one of the main suppliers of fuels -- oil and gas -- in the world. With sanctions thrusted upon it and with the US, the UK and some parts of Europe banning Russian oil, an adverse effect has been felt worldwide.

India pays about $1 billion for oil to Russia, though its oil import bill is more than $82 billion (for 2021) - a 108 per cent increase from 2020.

The first victim of the fuel price hike is vegetable and fruit rates. Once the fuel prices rise, it leads to higher transportation costs, which in turn drives fruit and vegetable prices. The vegetable and fruit prices have gone up by 10 to 20 per cent.

There has been a rise in the rates of tomatoes, chillies, peas, apples and pomegranates in the market.

For the general public, the pain does not end at fruit and vegetable prices, the war has also impacted the prices of cooking oil.

The country has witnessed a rise in the price of packaged sunflower oil by 4 per cent in February, mustard oil by 8.7 per cent. Groundnut oil was up 1 per cent and vanaspati went up by 2.7 per cent.

Almost 70 per cent of the India’s edible oil arrives from Ukraine. Ukraine and Russia together accounted for nearly 13 per cent of all of India’s edible oil imports in 2021.

Taking everything into consideration, Russia-Ukraine manufactures 60 per cent of sunflower oil.

As maintained by Kunal Vora, Head of India Equity Research at BNP Paribas India, "Edible oil prices have increased 15-20 per cent year-on-year. We expect prices to rise further due to the recent increase in edible oil prices."

Repeating the same view, Shammi Agarwal, MD, Pansari Group said, "Edible oil prices have gone up from Rs 125 to around Rs 170-180 in the past one month and we expect prices to shoot up during May-June. The war has disrupted the supply chain."

India gets over 90 per cent of its sunflower oil from Ukraine and Russia. It is feared that retail prices might futher worsen if the war goes on for long.

In the financial year ending March 2021, India imported approximately 13.35 million tonnes of edible oil worth over $10.5 billion.

According to the All India Petroleum Dealers Association President Ajay Bansal, "Consumers should be mentally prepared to pay more. Expect prices to rise for the next 15 days.”

Underlining the reasons behind the rise in prices, he said, "The price rise is due to the Russia-Ukraine war and the sanctions on Russia. India is dependent on international crude supply and international prices impact Indian consumers. India ships about 90 per cent of its oil needs from overseas markets."

Also Read: UK Foreign Secy in India for diplomatic push over Russia-Ukraine war