Russia-Ukraine war can trigger global recession

The Russian military operation in Ukraine has created a worrisome situation in the world. The war will have a huge impact on India and the global economy. If the current conflict between the two neighbouring countries of erstwhile USSR is not resolved within a week, it surely will push the world towards economic recession, which can be a second major blow to the already Covid pandemic stricken world. The former Defense Minister of Estonia has said that if the war goes on for ten more days, Russia will go bankrupt, because Moscow is spending more than Rs 1.12 lakh crores every day in the unprovoked war. This is a huge cost of the war, which apart from the people of Russia, citizens of other countries of the world may have to bear for a long time. This is a very bad time for small and medium Indian exporters also who export goods to Ukraine and Russia on a regular basis. The combined exports of the two countries account for 1% - 1.5% of India's total exports.

Vikas Singh Chauhan, Director, Home Textile Exporters Welfare Association (HEWA) and Sky Export & Import Pvt Ltd, says that Ukraine is not alone, many other countries are also with it. All NATO member countries, Canada, the US and major European economies are also supporting Ukraine directly or indirectly. The global economy which had just started rising after the third wave of Covid pandemic, has now been pushed into this unwanted crisis. Global trade will be badly hit because of the ongoing conflict. The demand which had just begun will be affected now. India's foreign trade is already feeling the heat. The war has affected the sentiment of the global buyers. Payment security has been affected. All this will adversely impact the exporters. The Export Credit Guarantee Corporation of India (ECGC), a Govt of India enterprise, which provides insurance protection to exporters against payment risks, has given notice that insurance coverage will be provided only on goods shipped to Russia before February 25, 2022. After this date there will be no insurance coverage for goods sent to Russia. In such a situation, the exporters, especially the small and medium ones, are experiencing a huge jolt to their business operations.

The US and Europe have barred Russia from the SWIFT payment system. That is, exporters cannot deal with Russia in EUR and USD. On the one hand, the payment has got stuck, while the shipping lines had already issued notification to recall the containers sent to Russia. Even the goods that have been ready cannot be shipped. In such a situation, the exporters have got a double whammy. Traders have appealed to the government that ECGC insurance coverage for exporters should be continued. There should be no delay in GST refund and other facilities. Some other relief measures must be brought in to bear the impact of the Ukraine war. And the government should provide financial assistance to the aggrieved exporters. Russia is a leading producer of crude oil, natural gas and fertilizers, but the prices of all these things are rising. Since India is a top importer of Urea and other soil nutrients, the price rise will adversely affect us.

(Author is a senior journalist and columnist)