HomeAnalysisOpportunity in Adversity during the Russia-Ukraine Armed Conflict

Opportunity in Adversity during the Russia-Ukraine Armed Conflict

Russia Ukraine war is no doubt unleashing multi-dimensional destruction across the globe, it has also thrown up some exciting possibilities, especially for Indian entrepreneurs

Impacted lives, destroyed livelihoods and ruined infrastructure are some of the immediate outcomes of Russia Ukraine war. The war is also endangering the world’s economic recovery post the COVID-19 pandemic. Inflation, food security, energy supply and logistics & supply-chain management are few of the key challenges being encountered by policy makers worldwide. As the global ramifications of the Russia-Ukraine war unfold at an alarming pace, Russia is being hit with sanctions by almost all the developed nations globally.

Sanctions against Russia by the EU

The European Union has united to raise its concern over Russia’s invasion of Ukraine. After a number of negotiations and mediations to ensure ceasefire and peace failed, the EU has hit Russia with a number of sanctions in response to the country’s belligerent stance in the ongoing war. Some of the most recent sanctions include the following.

  • Total ban on import of coal from Russia.
  • Blanket ban on four major Russian banks, (Holding a cumulative market share of 23%), including Russia’s second largest bank, VTB.
  • An order banning all Russian vessels from accessing EU ports (With exemptions on cargo pertaining to agricultural & food products, humanitarian aid and energy etc.)
  • Export bans on critical items like quantum computers, advanced semiconductors, sensitive machinery and transportation equipment.
  • Import bans on a wide range of products including wood, cement, seafood, liquor etc.
  • Additional curtailing measures including a general ban on the participation of Russian business enterprises in Member States’ public procurement. 

Impact on Indian market

The present armed conflict has impacted the economies of all the major nations across the globe including India’s. The war triggered a supply-chain crisis leading to a huge rise in inflation impacting the overall Indian economy. To offset the connected risks, the Indian government has cut oil excise duties. In the long run, this is expected to lead to widening of the current account deficit, impacting the country’s economic bottom line. Due to the continuing conflict, the annual inflation rate skyrocketed to a 7-month high of 6.01% in January 2022. This is way outside the Reserve Bank of India’s inflation-targeting band; it is also a lot higher than the premier institution’s predictions for 2022-23. It is imperative to note that Russia and Ukraine hold a significant share of the global commodities trade. For example, Russia supplies 10% of the global nickel. And along with Ukraine, it accounts for 29% of the global wheat exports. Some of their other export-oriented products include palladium, natural gas and corn. And as a logical consequence, the commodities sector touched record highs thanks to the war. India is one of the nations to be hit hard due to the ongoing fiasco.

Sunrise business sectors amidst the present crisis

Every dark cloud has a silver lining. While the war is no doubt unleashing multi-dimensional destruction across the globe, it has also thrown up some exciting possibilities, especially for Indian entrepreneurs – opportunity in adversity! The broader corporate sector might find rising inflation and rupee depreciation as major deterrents of profitability. Yet, the flip side suggests that long-term growth forecasts remain steadily upbeat. It has to be noted that contemporary India has a huge domestic investor base; now couple this with robust policymaking and what you have is a winning recipe. In fact, many trade experts state that the present phase could be a great time for “buy-on-dip strategies, as valuations come down to historical averages“. Some enterprise domains that gain from the present crisis include the Indian large cap IT industry, financials, and capital goods.

Considering the present environment defined by sanctions and embargos, the Indian IT sector could evolve as an alternative for businesses forced out of the Ukrainian and Eastern European markets. The grand old, time-tested Indian agriculture sector too stands to benefit as it has enough inventory to sustain the growth momentum, effectively countering the supply disruptions from Russia. India’s tourism sector too could benefit from the sanctions imposed on Russia. It might become an alternative in the form of a transit hub for Russian citizens, driving the footfalls of the aviation sector. And the rising gold prices, can have a huge wealth effect on India as it is the world’s second-biggest consumer of gold, after China. India’s bullion reserves could act as the source of future capital reserves from an investment and growth perspective.

 

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CP Raj
CP Raj
A senior level Marketing & Communications professional with over 20 years of rich and varied experience. Previous stints with reputed ad agencies, eminent corporate entities and renowned media houses. Satyam, TCS, The Hindu, Apple and Musings. Had the wonderful opportunity of contributing on a sustained format (8 years) for Wheels supplement of The Hindu, AP and Retail Plus supplement of The Hindu, Hyderabad (1 year). Present assignment – Principle Consultant.
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