How do you see the Ukraine war impacting India’s trade with Russia and Ukraine and will the implications be serious?

Fortunately, Russia and Ukraine are not major trading partner for India unlike China, the US, UAE, Saudi Arabia or even Switzerland. Russia is not even among India’s top-20 trading partners. Can we, therefore say that the impact on Indian economy will be limited? Let us first look at the quantum of Indo-Russian and Indi-Ukrainian trade and then look at whether such an impact would really be a palpable risk for India in terms of the economy.

Currently, the total trade that India has with Russia and Ukraine is a tad above $12 billion, or 1.3% of India’s total annual trade. That is quite small. Also, one of the concerns is the blockage of the Black Sea route due to embargoes. But, most of India’s trade with Russia currently happens through the Suez Canal so the pressure even if the Black Sea trade is embargoed may not be too deep on the Indian economy.

India’s total trade with Russia in FY22 is $9.4 billion till date and is almost 20% higher than last year. India’s imports fuels, mineral oils, pearls, semi-precious stones, nuclear reactors, boilers, machinery, mechanical appliances and fertilisers from Russia. At the same time, it exports pharmaceuticals, electrical equipment, organic chemicals and vehicles to Russia. The trade deficit is about $4.44 billion but the worry is the Russian impact on oil prices.

With Ukraine, the impact is still smaller as total trade is $2.3 billion in FY22. India imports agriculture products, metallurgical products, plastics and polymers from Ukraine and exports pharmaceuticals, machinery, chemicals and food products. While oil prices could be the one big risk for India from the Russia Ukraine war, the bigger risk would be about heightened risk-off flows from India.