Rajiv Ranjan shares insight on the Russia-Ukraine conflict and its impact on MSME in India
March 13: In India, with COVID-19 showing signs of receding, business owners were just about expecting to get back on their feet and start recouping at least part of the losses incurred by the pandemic.
However, the Russia-Ukraine conflict seems to have thwarted their hopes again with inevitable price inflation and a disturbed supply chain. Addressing a recent press conference, Finance Minister Nirmala Sitharaman also expressed concern, saying that the escalating geopolitical situation is a concern for New Delhi because trade disruptions could potentially impact supply chains and fuel inflation, which has already breached the Reserve Bank of India’s (RBI) tolerance threshold of 6 per cent in January.
The Indian import and export industry has been severely affected due to the caution in the foreign airspace. Industries across textiles, plastics, steel, pharma, Compressed Natural Gas (CNG), are nevertheless endangered. Russia is an important supplier of oil, metals, and natural gas and higher prices for these commodities are sure to create economic damage across the world. The Indian Rupee is also witnessing depreciation against the US Dollar, which will increase the cost of products in India.
Rajiv Ranjan, Chairman (Micro Clusters Development Council, MSME council, Employment generation council, Member NGC (AIMO) points out that amid the Russia-Ukraine crisis, the steel industry will see multiple impacts. “If you see the commodity prices globally, specifically, oil prices are about $110 a barrel in the international market, leading to an increased cost of energy. Metallurgical coal or coking coal is a vital ingredient in the steel-making process. The current situation is already getting reflected in higher oil and gas prices, leading to an increased cost of energy. Moreover, commodity and raw material prices will also see a steady increase.”
Russia and Ukraine are net exporters of steel, cumulatively to the tune of almost 40 million tonnes. Rajiv Ranjan further says this will disrupt supply chains in the next few months, leading to an increase in steel prices in the short term.
If this conflict continues, the market will see a sustained period of higher steel prices, which means that consumers will end up paying more for steel products. The automobile industry, especially, will be impacted in a big way, he added. The Indian textile industry is also witnessing challenges owing to the halt in shipments.
“The Indian textile sector, at large, will witness a massive impact as far as exports are concerned. Key export markets like Europe and Russia have already seen a temporary pause in activities, which would impact the overall turnover of Indian textile brands,”.
There is tremendous uncertainty in the global markets not only in terms of trade but also in terms of liquidity. Lack of liquidity would mean a temporary haul in payments and receivables which would further impact the cost of acquiring raw materials as well. The scenario is also challenging for the Indian pharma companies for whom the European market is a strong export destination. “You see that India is import-dependent for most of the raw material. Even for making paracetamol, we import excipients. With the rise in crude prices, the price of aluminium and PVC used in pharma packaging has gone up.”
It is not about one particular industry. In the truly global village of today, a war between two nations has a worldwide catastrophic financial impact.
Rajiv Ranjan, founder of Indie TikTok, who also heads Rudraa Initiatives Media and is the Chairman (Micro Clusters Development Council, Employment Generation Council, MSME Council) and Member NGC (AIMO).