By Subrata Majumder
Concerns loomed large on India’s double standard for its neutral stand on Ukraine – Russia war and sanction on Russia. Analysts apprehended India’s isolation from global geopolitical influence and global market, which could slow down its growth.
Nevertheless, outsmarting all the apprehensions, India underpinned a smooth and uninterrupted growth, defying spill-over impact of the war.
IMF foresaw slip in global growth. It forecasted global growth to 3.2 percent in 2022, from 6 percent in 2021 and further fall to 1.3 percent in 2023. In contrast, India’s GDP growth spurred to 9.4 percent and 7.2 percent in 2021-22 and 2022-23 respectively. It surpassed China’s growth.
How did India escape backlash of the war? Factors, which became detrimental to global growth due to war, were weathered by India. Inflation and energy crisis were the major impact of Ukraine – Russian war. Global inflation soared to 8.8 percent in 2022, from 4.7 percent in 2021. Energy prices heightened to 20 percent within five months of the outbreak of the war, according to IMF Outlook.
Europe fell prey to most vulnerable situation due to war. Conflict triggered massive food inflation and energy crisis in EU. Russia is the biggest supplier of wheat, gas and oil to the region. Incidentally, nearly 80 percent of the pipeline passes through Ukraine.
Russia, including Ukraine, account for nearly one-third of global wheat production. They are also major sources for corn in the world. Both are reckoned as “bread basket” of Europe”.
Russia-Ukraine war dented developing and emerging nations also, like ASEAN. Even though Russia and Ukraine do not have significant economic influences in these nations, the region succumbed to a spill-over impact due to sanctions by USA and EU on Russia.
India is lauded further for its resilience, when it is compared with Asian emerging nations, including China. In 2022, excepting Vietnam, India’s growth outpaced ASEAN-5 and China. In 2023, it is expected to lead the global growth, according to IMF Outlook. These demonstrate that India will be the most attractive nation to drive the global growth, amidst the protracted Ukraine war.
How did India downplayed the shock of global economy, owing to Ukraine war? The answer lies with India’s food self-sufficiency and its efficient political correlation with Russia for oil economy management.
From a food shortage nation in mid-sixties, which led to a nationwide famine in 1967, India has become a food surplus country. It is the world’s largest exporter of rice.
At present, India is the second largest producer of foodgrain in the world. It is the second largest producer of rice, wheat, sugarcane, groundnut, fruits and vegetables and largest producer of pulses.
The growth trajectory of foodgrain helped India to rein in global food crisis erupted due to Ukraine war. Eventually, while global food prices triggered and became a major headwind to the food import dependent nations, such as EU, India proved resilience.
With the onset of Russian invasion of Ukraine in February 2022, global food prices rose significantly in larger parts of EU and ASEAN areas. According to FAO, global food prices shoot up to 40 percent in March 2022. However, the food price hike slipped downward gradually to 18 percent January 2023, given the thrust on alternative sources by EU for food imports.
Against this global food price conundrum, food inflation in India stagnated. It ranged between 6-7 percent during 2022-23 to 2024-25.
India is an oil deficit nation. Over 90 percent of oil requirement is met by imports. With timely approach to Russia, utilizing its long years political hobnob and denouncing oil sanction, India diversified its oil imports from Russia. It was a successful political win-over by India, while challenging EU sanction on Russia.
From a mere 2 percent oil import from Russia in the pre-war period, oil import from Russia surged to nearly 35.7 percent in 2023-24. In the pre-war period, OPEC was the major source for crude oil import. Nearly, over 70 percent of oil used to be imported from OPEC.
Russian oil was not only substantiating the oil supply in the oil basket, it also provided a major saving in foreign exchange. Russian crude was the cheapest among all major supplies during the war period.
Given the OPEC decision to cut production of oil and subsequent sanctions on Russia from December 5, 2022 by USA and EU, another major oil shock was imminent. India could successfully outsmart the oil crisis shifting to oil imports from Russia.
For the first time India became resilient to oil driven global inflation. CPI (Consumer Price Index) hovers around 6.6 percent increase in 2022-23, which was much lower than global inflation of 8.8 percent. It fell further to 4.36 percent in 2024-25.
In summing up, India could withstand the global shock of Russia-Ukraine war by virtue of its strong economic fundamentals and political manoeuvring in the global power game, reposing confidence in neutralizing the war effect. (IPA Service)
