The Modi govt’s approach towards managing economic crisis during Russia-Ukraine conflict

New Delhi: The Russia-Ukraine conflict, a geopolitical crisis unfolding far from India's borders, has nonetheless cast a long shadow over the country's economic landscape. 

This war, escalating since February 2022, significantly disrupted global supply chains, particularly in energy markets, posing a formidable challenge to India's economic stability. 

Despite these adversities, India has showcased remarkable resilience, employing a blend of diplomatic finesse and economic strategy to mitigate the fallout.

Global supply chain disruptions

The conflict has led to a drastic reduction in Russian oil exports due to Western sanctions, causing a global scramble for energy resources. Europe, heavily reliant on Russian energy, has sought alternatives, inadvertently driving up global oil prices. For India, which imports around 80% of its crude oil, this scenario threatened a severe economic shock.

India's strategic response

Securing discounted Russian oil: India's diplomatic agility allowed it to negotiate discounted oil deals with Russia. This move not only ensured a steady supply but also cushioned India from the full brunt of global oil price hikes. 

Diplomatic balancing act: While maintaining its strategic autonomy, India has managed to keep its relations with both Western countries and Russia intact, ensuring energy security without alienating key international partners.

Oil price management

The global oil market saw unprecedented volatility, with prices oscillating wildly. For India, this could have led to a catastrophic inflationary spiral. However, through strategic oil purchases from Russia, India managed to stabilise domestic fuel prices. 

Increased imports from Russia: From virtually no imports, Russia has become one of India's top oil suppliers, significantly altering India's energy import dynamics.

Fuel subsidies: The Indian government introduced targeted fuel subsidies, a financial buffer that protected consumers from the full impact of rising oil prices. Although this rerouted funds from other welfare schemes, it was deemed necessary to prevent economic destabilisation.

The Modi government's approach has been multifaceted:

Inflation control: By managing oil prices, the government has kept inflation in check, preventing a scenario where rising fuel costs could have led to a broader price surge across various goods and services.

Economic stability: The strategic import of Russian oil at lower prices has helped maintain economic stability, ensuring that the cost of living did not escalate uncontrollably.

Diplomatic and economic strategy: India's ability to navigate this crisis underscores its growing prowess in global diplomacy and economic policy-making, balancing between maintaining international relations and securing national interests.

While India has adeptly managed the immediate threats posed by the Russia-Ukraine conflict, the long-term implications remain a concern. The government's focus on energy security, diversification of energy sources, and investment in renewable energy are steps towards insulating the economy from future geopolitical shocks.

India's response to the global economic turbulence caused by the Russia-Ukraine war highlights its strategic acumen in managing external crises. By leveraging its position in global diplomacy and implementing smart economic policies, India has not only weathered the storm but also positioned itself as a model for resilience in the face of international economic disruptions.