How does the Russo-Ukrainian conflict impact India’s foreign trade?
Russia and Ukraine have a small share in India’s foreign trade and this conflict may not impact us much, except in pharmaceuticals and sunflower oil refining industry. The rising crude oil prices may, however, spoil India’s party.
Representational image. Reuters
As the Russo-Ukrainian conflict continues, Indian markets are reacting and in red. Before the conflict started NSE’s benchmark stock index — NIFTY 50 — was at 17,063. It went down to around 15,000 mark to again rise to just cross the 16,000 mark. The markets would have to face more brunt if this conflict continues. This raises a question: Is Russia and/or Ukraine India’s significant trading partner that a conflict with them can hurt the Indian economy?
After analysing the data, it is observed that both Russia and Ukraine are not significant trading partners. As highlighted in Table 1, India’s imports from Ukraine in FY 2022 and 9 months of FY 2023 was $2.14 billion and $1.98 billion respectively. This is around 0.54 percent and 0.45 percent of India’s total imports. Russia stands at a relatively better position having 1.39 percent and 1.56 percent share in India’s total imports in FY 2022 and 9 months of FY 2023 respectively, importing goods worth $5.49 billion and $6.89 billion respectively. On the exports front, again both these countries are minuscule partners of India. India exported goods worth $450 million and $372 million to Ukraine in FY 2022 and 9 months of FY 2023 respectively, and $2.66 billion and $2.55 billion to Russia for the same period respectively. This also shows that we are running a trade deficit with both the countries.
| Table 1: India’s Trade with Ukraine and Russia | ||||
| Ukraine | Russia | |||
| FY2022 | 9MFY2023 | FY2022 | 9MFY2023 | |
| Imports (US$ Mn) | 2,139.86 | 1,980.11 | 5,485.75 | 6,893.57 |
| Share (%) | 0.54 | 0.45 | 1.39 | 1.56 |
| Exports (US$ Mn) | 450.97 | 372.23 | 2,655.52 | 2,546.74 |
| Share (%) | 0.15 | 0.12 | 0.91 | 0.83 |
| Total (US$ Mn) | 2,591.37 | 2,352.79 | 8,142.66 | 9,441.87 |
| Share (%) | 0.38 | 0.32 | 1.19 | 1.27 |
Source: DGCI&S
Further analysis of the import and export data of both these countries gives us an interesting picture. India imported 1.74 million tonnes of crude sunflower oil in FY 2022 and 0.97 million tonnes in 9 months of FY 2023. Ukraine has a disproportionately significant share in India’s total crude sunflower oil imports. India imported 2.2 million tonnes of crude sunflower oil in FY 2022 and 1.4 million tonnes in 9 months of FY 2023. Thus, Ukraine had an 80 percent share in total imports of crude sunflower oil in FY 2022, which was reduced to 72 percent in 9 months of FY 2023. This is a minuscule reduction in India’s dependence on Ukraine, as India’s imports of crude sunflower oil from Argentina doubled from 6.3 percent in FY 2022 to 12.3 percent in 9 months of FY 2023.
It is pertinent to note that Ukraine is the world’s largest exporter of sunflower oil with total exports of around 5.5 million tonnes between September 2020 and Aug 2021 marketing year and around 3.5 million tonnes in 7 months. It is understood that India is the second largest export market for Ukrainian sunflower oil, first being China. With the Russo-Ukraine conflict, sunflower oil importers in India are heavily hit due to shipments they have booked and are unlikely to get delivered. It is again important to note that crude sunflower oil imports’ share in total imports is extremely insignificant at 0.5 percent.
The other product India imported from Ukraine is fertilizers. Rest all commodities imported are a minuscule portion in the total trade.
| Table 2: Top 5 Commodities Imported from Ukraine | ||||
| Products | FY2022 | 9MFY2023 | ||
| Value (US$ Mn) | Share (%) | Value (US$ Mn) | Share (%) | |
| ANIMAL OR VEGETABLE FATS AND OILS AND THEIR CLEAVAGE PRODUCTS; PRE. EDIBLE FATS; ANIMAL OR VEGETABLE WAXEX. | 1,607.12 | 75.10 | 1,371.11 | 69.24 |
| FERTILISERS. | 279.53 | 13.06 | 267.60 | 13.51 |
| INORGANIC CHEMICALS; ORGANIC OR INORGANIC COMPOUNDS OF PRECIOUS METALS, OF RARE-EARTH METALS, OR RADI. ELEM. OR OF ISOTOPES. | 66.83 | 3.12 | 178.25 | 9.00 |
| PLASTIC AND ARTICLES THEREOF. | 29.49 | 1.38 | 10.09 | 0.51 |
| WOOD AND ARTICLES OF WOOD; WOOD CHARCOAL. | 24.96 | 1.17 | 27.91 | 1.41 |
Source: DGCI&S
Pharmaceuticals top the list of products exported from India to both Ukraine and Russia. India’s total pharmaceuticals exports stood at $19.4 billion in FY 2022 and $14.4 billion in 9 months of FY 2023. Pharmaceuticals’ share in total exports of India is 6.6 percent in FY 2022 and 4.7 percent in 9 months of FY 2023. The US tops the list and is an extremely important market for Indian pharmaceutical products. Russia ranks fourth in the list of exports markets for India, with a 2.4 percent share in FY 2022 and 2.7 percent in 9 months in FY 2023. Ukraine is again an extremely small market for India, ranking 29th with 0.9 percent share in FY 2022 and 0.8 percent share in 9 months in FY 2023. We have observed that many pharmaceutical companies are impacted due to this conflict.
| Table 2: Top 5 Commodities Exported to Ukraine | ||||
| Products | FY2022 | 9MFY2023 | ||
| Value (US$ Mn) | Share (%) | Value (US$ Mn) | Share (%) | |
| PHARMACEUTICAL PRODUCTS | 173.68 | 38.51 | 109.28 | 29.36 |
| NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANICAL APPLIANCES; PARTS THEREOF. | 14.38 | 3.19 | 21.60 | 5.80 |
| PLASTIC AND ARTICLES THEREOF. | 20.64 | 4.58 | 20.78 | 5.58 |
| IRON AND STEEL | 11.35 | 2.52 | 19.83 | 5.33 |
| MISCELLANEOUS CHEMICAL PRODUCTS. | 14.88 | 3.30 | 17.11 | 4.60 |
Source: DGCI&S
Russia is India’s major trading partner in mineral fuels, oils, and products and diamonds, precious metals, etc. Mineral fuel and oil imports top the list followed by diamonds and precious metals. India imported mineral fuels and oil worth $99.7 billion (25.3 percent share of total imports) in FY 2022 and $136.3 billion (30.1 percent share of total imports) in 9 months in FY 2023. Russia ranked 10th largest exporter of mineral fuel and oil to India and its share in India’s imports has increased from 2.1 percent in FY 2022 to 2.8 percent in 9 months in FY 2023. This also shows that India’s dependence on Russian crude oil has increased marginally.
| Table 2: Top 5 Commodities Imported from Russia | ||||
| Products | FY2022 | 9MFY2023 | ||
| Value (US$ Mn) | Share (%) | Value (US$ Mn) | Share (%) | |
| MINERAL FUELS, MINERAL OILS AND PRODUCTS OF THEIR DISTILLATION; BITUMINOUS SUBSTANCES; MINERAL WAXES. | 2,110.67 | 38.48 | 3,773.77 | 54.74 |
| NATURAL OR CULTURED PEARLS, PRECIOUS OR SEMIPRECIOUS STONES, PRE.METALS, CLAD WITH PRE.METAL AND ARTCLS THEREOF; IMIT. JEWLRY; COIN. | 953.18 | 17.38 | 986.02 | 14.30 |
| FERTILISERS. | 595.98 | 10.86 | 405.41 | 5.88 |
| PROJECT GOODS; SOME SPECIAL USES. | 362.23 | 6.60 | 276.79 | 4.02 |
| ANIMAL OR VEGETABLE FATS AND OILS AND THEIR CLEAVAGE PRODUCTS; PRE. EDIBLE FATS; ANIMAL OR VEGETABLE WAXEX. | 292.99 | 5.34 | 268.02 | 3.89 |
Source: DGCI&S
Another major group of commodities that India imports from Russia is diamonds and precious metals. India is the 3rd largest market for Russian diamonds, with Antwerp ranking 1st and UAE ranking 2nd. Russia ranks 11th largest exporter of diamonds and precious metals into India, with around $1 billion of imports which is 1.7 percent of the total imports of diamonds and precious metals. Russia sold around 19.7 million carats to Belgium (Antwerp), which is the global capital for diamond trade, followed by 14.1 million carats to the UAE, and thereafter India ranked 3rd at 4.1 mn carats in 2020. Then too for India, Russia is not a significant partner and the trade is not heavily impacted due to this conflict.
| Table 2: Top 5 Commodities Exported to Russia | ||||
| Products | FY2022 | 9MFY2023 | ||
| Value (US$ Mn) | Share (%) | Value (US$ Mn) | Share (%) | |
| PHARMACEUTICAL PRODUCTS | 469.99 | 17.70 | 385.97 | 15.16 |
| ELECTRICAL MACHINERY AND EQUIPMENT AND PARTS THEREOF; SOUND RECORDERS AND REPRODUCERS, TELEVISION IMAGE AND SOUND RECORDERS AND REPRODUCERS,AND PARTS. | 301.77 | 11.36 | 406.98 | 15.98 |
| ORGANIC CHEMICALS | 267.38 | 10.07 | 184.34 | 7.24 |
| NUCLEAR REACTORS, BOILERS, MACHINERY AND MECHANICAL APPLIANCES; PARTS THEREOF. | 226.98 | 8.55 | 225.60 | 8.86 |
| IRON AND STEEL | 137.88 | 5.19 | 158.29 | 6.22 |
Source: DGCI&S
This data only highlights that Russia and Ukraine have a very small share in India’s foreign trade and this conflict doesn’t heavily impact India except pharmaceuticals and sunflower oil refining industry. However, crude oil prices have jumped to around $120/bbl due to this conflict. This jump in crude prices would have an impact on the Indian economy driving a rise in current account deficit and also contributing to rise in inflation. To that extent, India would get impacted due to this Russo-Ukrainian conflict.
Sumeet Mehta is a Chartered Accountant by qualification and a Corporate Finance Professional. He is the author of ‘Diagnosing GST for Doctors’ published by CNBC Books18. Views expressed are personal.
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