The NDF adds a negative tone to India’s economic outlook since the Ukrainian war

The NDF adds a negative tone to India’s economic outlook since the war in Ukraine

The International Monetary Fund (IMF) said the economic downturn caused by the growing war between Russia and Ukraine would cause negative damage to the Asian third economy and widespread concern about the impact of the Russia-Ukraine conflict on the world economy.

“The global economic consequences of the war are expected to have a negative impact on the Indian economy through a number of channels, different from those that affected the Indian economy during the COVID-19 era,” Gerry Rice, director of the International Monetary Fund’s communications department, told reporters.

Mr Rice said the significant rise in global oil prices was a major trade shock with macroeconomic consequences.

It will lead to higher inflation and the current account deficit; said Russia on February 24 when it launched what it called a “special military operation” in Ukraine.

The Indian Reserve Bank finds itself in a dilemma between slowing economic growth and higher inflation, along with what the US Federal Reserve wants to tighten policy on this week.

India’s latest inflation data rose further in February as price pressures rose to the top of the Reserve Bank of India’s 2-6 per cent target band for the second month in a row. This was even before the Russian invasion of Ukraine at the end of last month.

The data also showed that the trade deficit widened to $ 17.94 billion in February, with higher fuel import bills taking the lion’s share, suggesting a further widening supply of rising global energy prices.

This does not cover the rise in the gross price of more than $ 100 a barrel and the rising costs of a wide range of commodities, fueled by supply concerns following sanctions from Western countries and an embargo on oil imports to Russia in response to the invasion of Ukraine.

“But the impact of the current account could be partially offset by movements in commodity prices that India exports, such as wheat,” Mr Rice said.

He added that the negative impact of the war in Ukraine on the US, EU and Chinese economies could dampen external demand for Indian exports. Conversely, supply chain disruptions could have a negative impact on Indian import volumes and prices.

“There is also a tightening of financial conditions and an increase in uncertainty, leading to higher borrowing costs and a reduction in confidence due to domestic demand and the fiscal situation,” Mr Rice added.

According to the NDF, there is a lot of uncertainty about India’s forecasts.

“In short, I believe that there is a great deal of uncertainty about India’s forecasts. about policies, ”Mr. Rice said.

On the other hand, the NDF said that the immediate impact of the war on China will be less.

“The immediate impact of the conflict is relatively small in China. Higher oil prices may affect domestic consumption and investment, but price constraints will limit the impact,” Mr Rice added.

According to an IMF official, exports to China from Russia account for a relatively small share of exports overall.

“However, China would be affected if trade partner growth slowed significantly, caused severe supply disruptions, or had a more severe impact on the global financial market,” he said.

The NDF will release a report on economic forecasts next month, and Mr Rice said it is likely that the growth forecast will be revised next month.

“It simply came to our notice then.

The crisis adds to already delicate exchanges in Asia, with rising inflation, limited fiscal space and the possibility of rising global interest rates amid heavy public and corporate debt.

“The severity and duration of the conflict will be a key factor for Asian central banks to overcome this current rise in commodity prices in China,” Mr Rice said.

The United States and other Western countries have imposed heavy economic sanctions on Russia to punish Moscow for invading Ukraine.

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