The aam admi in India is likely to feel the tremors of the Russia-Ukraine crisis as prices of essential commodities rise.
The global economy is on edge as tensions between Russia and Ukraine simmer. Experts believe that the prices of various commodities, such as natural gas and wheat, will rise in the near future.
Here’s what’s likely to change in the coming days:
Natural gas prices
The Ukraine-Russia crisis has pushed the price of Brent crude oil to $96.7 per barrel, the highest since September 2014.
Russia is one of the world’s largest crude oil producers. The current crisis may cause oil prices to rise to more than $100 per barrel in the coming days. A rise in the price of crude oil will have an impact on global GDP.
According to JP Morgan, a rise in oil prices to $150 per barrel would reduce global GDP growth to 0.9%.
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.
Petrol, Diesel prices to rise
High crude oil prices have previously contributed to increases in petrol and diesel prices across India. In 2021, the country’s fuel prices reached all-time highs.
If the Russia-Ukraine crisis continues to simmer, India’s petrol and diesel prices may rise.
Oil accounts for about a quarter of India’s total imports. More than 80% of India’s oil needs are met by imports. The current account deficit will be impacted by an increase in oil prices.
Price of wheat may rise
If there is an interruption in the flow of grain from the Black Sea region, experts fear it could have a major impact on prices and fuel food inflation.
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.
Price of metals to rise
The price of palladium, a metal used in automotive exhaust systems and mobile phones, has risen in recent weeks amid fears that Russia will face sanctions. The country is the world’s largest palladium exporter.