Of the economic googlies likely to come India’s way in 2023, the war in Ukraine will perhaps be the least predictable. There’s no sign of a resolution and the impact it has had on supply disruptions has been equally hard to predict.For India, there have been two direct impacts and another, but no less important, indirect impact. For starters, it pushed up our import bill for both energy and fertilisers. Both these (and the rising price of wheat globally) have also contributed to rising inflation globally, promoting Indian policymakers to raise interest rates in tandem with the rise in global rates. The net result: Higher inflation and lower growth for India. “The conflict worsened the growth-inflation mix for India. It pushed up crude prices and caused supply side bottlenecks, thereby putting significant upward pressure on inflation. It also raised the fertiliser bill substantially and threatened to derail the budgetary math,” says Dharmakriti Joshi, chief economist, Crisil.India’s crude basket rose rapidly from $80 in 2022-23 to $110 in the six months after the war broke out in February 2022. Although Russian crude was available at a discount, India’s oil import bill rose 76 percent in the first six months of this fiscal to $90.3 billion (`720,403 crore) according to data from the ministry of petroleum and natural gas.For fertilisers, the subsidy bill is expected to rise from `1.1 lakh crore in the Budget to `2.3-2.4 lakh crore, according to the Fertiliser Association of India. While this is likely to moderate by 25 percent in FY2024 on account of falling potash prices, the bill is still, on average, twice that of the last five fiscals. While the government hiked petrol and diesel prices, it shied away from raising fertiliser prices and instead raised the subsidy.Also read: All is not well in the economy, say the most optimistic soothsayers
Check out our Festive offers upto Rs.1000/- off website prices on subscriptions + Gift card worth Rs 500/- from Eatbetterco.com. Click here to know more.