One Year of Russia-Ukraine War [UPSC Notes]

The Russia-Ukraine war completed one year on February 24, 2023. In this context, it is important to know what is the current status of the situation in Ukraine, and what are its implications for all stakeholders involved including countries like India. This is an important topic for the UPSC exam international relations segment. 

One Year of Russia-Ukraine War

In 2022, Russia launched a full-scale military invasion of Ukraine, terming it a “special military operation” to “demilitarize and denazify” it.

• The conflict has continued for over a year, resulting in the death of more than 150,000 people, the destruction of infrastructure, and no clear winner between Russia and Ukraine.
• The ongoing conflict has had a ripple effect on the global economy, including that of India.

Impact of Russia – Ukraine War on India & the World

1. Disruption in Global Supply Chains: Global supply chains have been hit massively in the last two years, with the coronavirus pandemic in early 2020 and the Russia-Ukraine war causing disruptions. 
   • It triggered a global food shortage, affecting underdeveloped & developing countries the most.
   • However, global supply chains have returned to pre-war levels according to the Baltic Dry Index. 
   • Despite this, the disruption has caused higher prices, especially for food and fuel items.

Source: Moneycontrol

                2. Higher Prices for Food and Fuel Items: The Food Price Index of the UN Food and Agriculture Organization is now back at pre-war levels, with the cereals price index at 147.4 in January ‘23.

• • Inflation has risen, but wholesale inflation has crashed in recent months thanks to lower commodity prices. 
  • The tightening of monetary policy in developed countries to combat inflation is expected to lower external demand for India’s exports, leading to a GDP growth rate close to 5% in 2023-24 from 7% this year.

Source: Moneycontrol

                3. Impact on India’s Crude Oil Basket: The price of India’s crude oil basket has fallen appreciably in recent months and is averaging just over $80 per barrel in February, sharply lower than $116.01 in June (2023).

• • During this time, India’s crude imports from Russia jumped 9.2 per cent on a monthly basis to a record 1.4 million barrels per day (bpd).
  • The surge in fuel prices in 2022 led to a massive deterioration in India’s trade balance due to being a net energy importer, with merchandise imports hitting record monthly highs.
  • Despite the large merchandise trade deficit, India’s services trade has been thriving with record exports and easing global commodity prices, bringing down the overall trade deficit to $1.27 billion in January 2023 from $16.32 billion in September 2022.

               4. Pressure on Exchange Rate: The widening of the trade deficit puts pressure on the exchange rate, and the Indian currency hit multiple all-time lows against the US dollar in 2022.

• • As a result, the Reserve Bank of India had to sell record amounts of foreign exchange from its reserves to decrease exchange rate volatility.
  • However, the central bank maintains that its reserves, now under $600 billion, remain adequate, and the exchange rate has retreated below the 83-per-dollar mark. 

Source: Moneycontrol

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