Flashpoint Ukraine

News: Russia’s invasion of Ukraine and possible sanctions by US will impact India adversely.

What are the probable adverse impacts on India?

Inflationary impact: the significant upward pressures on oil prices, exacerbated by the Organisation of the Petroleum Exporting Countries’ recent unwillingness to raise output. It will accentuate inflationary impulses and increase risks for the Reserve Bank of India’s inflation projections

Impact on Security: More than 60 per cent of India’s defence forces are equipped with Russian weapons, and India recently bought its SS-400 missile protection system. The country, therefore, remains dependent on Moscow for spare parts and technology transfers that escalating war in Ukraine could disrupt. This is a development India can ill afford in the face of sustained Chinese aggression.

Impact on Clean energy Transition: India may also find its climate change commitments under pressure as the planned transition to greater use of gas as one clean energy source may fall out of reach as prices spiral.

Impact on Tea Industry: Additional sanctions from the US on Russia will create huge problems for the tea industry. Russia accounts for 18 per cent of Indian tea exports. With sales to the other major buyer, Iran, constrained by sanctions for some years, the employment-intensive Indian tea industry, already struggling with low productivity and rising costs.

Impact on Other Exports: Other Europe- and Russia-facing exporters, such as in engineering and pharmaceutical, may also come under pressure in the event of a full-scale war over Ukraine.

Impact on India’s Indo-Pacific strategy: The crisis could cause a readjustment of US attention away from the Indo-Pacific at a time when India may urgently require a robust counterbalancing alliance to China’s expansionary ambitions in the region.

Source: This post is based on the article “Flashpoint Ukraine”  published in Business Standard on 24th Feb 2022.

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