remors of the Russia-Ukraine crisis are likely to be felt by the aam aadmi in India as prices of essential commodities are set to rise.
While tensions between Russia and Ukraine simmer, the global economy is on tenterhooks. From natural gas to wheat, experts believe that prices of various commodities will increase in the near future.
Here’s what is likely to be impacted in the days to come:
The Ukraine-Russia crisis has pushed Brent crude oil price to $96.7 per barrel, the highest it has been since September 2014.
Russia is one of the biggest producers of crude oil. The current crisis can lead to prices shooting up to more than $100 per barrel in the days to come. An increase in crude oil price will have a spillover impact on global GDP.
Analysis by JP Morgan notes that a spike in oil prices to $150 a barrel would reduce global GDP growth to just 0.9 per cent.
Crude oil-related products have a direct share of over 9 per cent in the Wholesale Price Index (WPI) basket. An increase in Brent crude prices, hence, will increase India's WPI inflation by around 0.9 per cent.
According to experts, the price of domestic natural gas (CNG, PNG, electricity) could increase tenfold if Russia goes to war with Ukraine.
LPG, KEROSENE SUBSIDY TO INCREASE
The rise in crude oil prices is expected to increase the subsidy on LPG and kerosene.
In the past, high crude oil prices have contributed to the increase in petrol and diesel prices across India. The country witnessed record highs in terms of fuel prices in 2021.
If the Russia-Ukraine crisis continues to simmer, India could see an increase in petrol-diesel prices.
Oil consists of around 25 per cent of India’s total imports. India imports more than 80 per cent of its oil requirement. A rise in oil prices will impact the current account deficit.PRICE OF WHEAT MAY RISE
Russia is the world's top wheat exporter while Ukraine is the fourth largest exporter of wheat. The two nations account for nearly a quarter of total global exports of wheat.
According to a recent United Nations report, food prices have already climbed to their highest level in more than a decade largely because of the impact of the pandemic on supply chains.
The days to come could see volatility spikes in energy and food prices. The resultant investor sentiment could threaten investment and growth in economies around the world.
The price of palladium, a metal used in automotive exhaust systems and mobile phones, has soared in recent weeks amid fears of sanctions being imposed on Russia. The country is the world’s largest exporter of palladium.