Explained: How Russia’s invasion of Ukraine could impact Indian exports

Russia is India’s 25th largest trading partner with exports of $2.5 billion and imports of $6.9 billion in the first nine months of FY2022. India’s key exports to Russia include mobile phones and pharmaceuticals while India’s key imports from Russia are crude oil, coal and diamonds. Tea is a major export item from India.

India’s exports to Ukraine were about $372 million in the April-December period led by pharmaceuticals and mobile phones, while imports worth about $2.0 billion are dominated by sunflower oil and urea. Together exports to both countries accounted for under one per cent of India’s exports in the first three quarters of this fiscal.

Sanctions on Russian exports including crude oil are seen as unlikely by exports as crude oil prices are already at an eight-year high and crossed the $100 per barrel threshold on Thursday.

Experts noted that exporters are delaying execution of orders from both countries over concerns that shipments may be stuck during a conflict.

Exporters are also delaying execution of orders if they have a timeline which allows them to supply later, said Ajay Sahai, director general & CEO of the Federation of Indian Export Organisations (FIEO). “We are worried about shipments being stuck, we don’t know how long it will stay at which port (during a conflict),” Sahai said.

A top executive at a pharmaceutical company said that cargo insurance was not available for shipments to Ukraine, noting, “exporters will have to make their own decision on supply keeping in mind the risk of goods getting stuck.”

Another top executive at a leading Indian pharmaceuticals company with large exports to both Russia and the Ukraine said currently there was no issue in exporting goods to either country.

What are exporters concerned about?

Experts noted that while India’s exports to Russia could continue largely uninterrupted despite US sanctions, potential sanctions from the UN could have a much more significant impact on exports to the region. The US has already announced sanctions targeting VEB (Russia’s state development bank) and the Russian military bank in the first tranche of sanctions with more sanctions likely after Russian President Valdimir Putin on Thursday authorised a “special military operation” in the Donbass region of Eastern Ukraine.

Given the scale of exports to the region, exporters are more concerned about the impact of a conflict on the overall recovery in global trade.
“The greater worry is that if war happens it will have a global impact and at this point of time any setback will delay the process of normalisation of global trade,” Sahai said.

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