Mumbai
The impact of the ongoing Russia-Ukraine conflict will be felt across commodities and asset classes in India, State Bank of India (SBI) said in a research report released on Friday.
“Oil prices have already crossed $100 per barrel. Other commodities which will see inflation include precious metals gold, palladium and platinum. Ukraine being an important exporter of agriculture products, there will be the impact on prices of wheat and corn if navigation lines in Black Sea are disturbed,” said the report.
The research report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, noted, “for India which has no strategic interest in this conflict the fall out will be mostly economic. Rise of commodity prices will impact CAD and domestic inflation. The export outlook of services towards Europe will be impacted negatively. Sanctions on Russia may impact regular trade (e.g. tea) between India and Russia.”
Historical trends, since 2018, indicate that it takes around 18 months for crude prices to crash by as much 67 per cent from the highest level and 30 per cent drop from the highest level could even come in less than 3 months. Thus the decline in crude prices from the current high levels could come even faster going by the recent trends and it augurs positive for the overall macro prognosis. Financial markets also recover faster after a geo-political induced decline as the experience of 3 decades reveals.
Notwithstanding the trajectory of crude oil prices, the impact on inflation in the Indian context will be keenly watched.
