The impact of Ukrainian war on the South Asian Economies

Will the war stop or the world? (The impact of Ukrainian war on the South Asian Economies)

By: Abhishek Chauhan and Manya Arora (Symbiosis International University)

The Russia-Ukraine crisis not only corpsed the humanity but also the economy worldwide. This death crisis was not restricted to the demographics of the two borders but had an impact beyond the physical boundaries of the nations i.e., the South Asian economy was also the one bombarded and shattered during the crisis heavily. How?

Well, during the late February of 2022 started the downfall of the economies worldwide post pandemic again. The months of 2020 already led to the deep diving of the graphs because of the deadly virus spread and shrunk the global economy by almost 6%. This contraction was absorbed and vaccinated through various trade routes and international affairs. But the Ukrainian crisis made this positive growth and turned it back with an expected fall of a bigger numerical percentage in the coming year.

As a major importer of the commodities from round the world, the South Asian countries are susceptible to hovering commodity prices, growing inflation, disrupted and disturbed supply chains and rising poverty. The countries such as India, Bangladesh, Sri Lanka and many others who are major importers of the world produce and major part of supply chains and trade, globally are experiencing a bleak growth in their overall monetary cycles.

The increase in inflation has outstripped the recovery of the real economy. The smaller economies like that of Bhutan and Sri Lanka could see larger shorter-term growth contractions than India and Bangladesh. This impact could be wider than before that of the pandemic because the inflation was already a positively growing number in such countries which is now fuelled up further by the similar shock of the war. This unimaginable occurrence has sped up the process of sharp growth in commodity prices. The EIU was already forecasting global inflation of nearly 6% this year, but now that mark is expected to be exceeded, given the huge spikes. This increasing commodity cost

is another factor further contributing to the rising cost of production and its factors- labour, energy and other required inputs. Southern Asia is already a prime user of fossil fuels and the war has blocked up the ways of importing the same at a lower price. For instance, Brent Crude oil prices breached the $ 100 a barrel barrier, the highest level since 2011 which clearly indicates the streak growth in the pricings. The next question popping up because of the rising prices is Will war in Ukraine hasten the end of fossil fuels?

Not only is the above question open-ended but also, it owns an answer to a further rising problem of the falling industrial growth. The rising fuel prices, the falling competitiveness of cheap labour are the two correlated factors giving birth to poverty. This cycle of monetary crisis is giving rise to chains of multiple problems. The industrial growth in countries stays halted because of the lesser imports and rigorously falling international relationships. The disrupted supply chains impact the countries in ways that we could never imagine because the sector it impacts might feel a smaller one but the ripples of the shockwaves affect the overall country heavily. For a very small explanation- among the two countries at war, Ukraine’s 55 percent of wheat accounts for a major

part of imports to Asia. Low- and middle-income countries are important beneficiaries of Ukraine’s wheat while the two countries in tussle own almost half of Bangladesh’s imports and

Pakistan’s 39% of wheat imports. The war and disrupted chains of supply are further giving a

boost to the cravings of the 67% of world’s hungry people that reside in Asia. “Coming at a time

when global food supply chains are already choked due to the pandemic, the Russian invasion of Ukraine will worsen an already dire food security situation.” as per The Diplomat. The statement quoted clearly defines a wider impact of the disturbing supply chains on the Asian and SouthAsian countries.

The hunger of food that is getting rooted up because of the hunger of power is furthermore resulting in loss of not only lives within the two countries involved but also killing the people worldwide financially and physically. The financial deaths because of the lower incomes- higher pay is giving a room for poverty to boom itself up and erode the ongoing lives while the physical deaths are something not to be described further. The economic downfall of South Asia expresses concern

towards the recently hit recession but also fuels the belief that this impact will be multiplicatively more powerful than the combined recession faced during the pandemic.

This impact would not have a similar picture across every country but have a differential impact. Larger countries in the South Asian boundaries may be the one facing a smaller impact in terms of numerical downfall of economy just as India or Bangladesh which have bigger domestic markets and some fiscal space but the smaller economies like Nepal or Maldives might not be able to sustain the impact. These countries could see higher disruption in their economies. Countries like Pakistan which already are highly dicey in terms of their economic stability are also in dire of contracting. The only way to tackle the growing global uncertainties in the monetary environment is implementing policies- monetary or fiscal, improving the debt management and alleviating the poverty of the poor. Once we see some degree of economic stability, the further requirement of the time would be to boost up the private sector and markets and begin economic reforms to move to low-carbon green growth. The only question that has the eyes glued on itself is- Will the war stop or stop the world? and the answer still rests unanswered.

REFERENCES

1. The Russia–Ukraine crisis will hurt South Asia | East Asia Forum 2. Russia-Ukraine crisis: Economic consequences on South Asia | Daily FT 3. Russia’s war in Ukraine is crushing Sri Lanka's $81 billion economy (theprint.in)

4. S&P Global forecasts 8.5% contraction in Russia's economy in 2022 (yahoo.com)