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Impact of the Ukraine War on India’s Economy

Written by Nihal Singh Dhingra, a grade 10 student.

Put simply, economy is about goods and services in a particular region (country, area etc) – basically the way in which goods and services are made, sold, and used in that region.

By I Kid You Not , in Current Stories Explained Facts to Know , at June 6, 2022 Tags: , ,

Written by Nihal Singh Dhingra, a grade 10 student.

The war between Ukraine and Russia started in February. Economists all over the world are worried about its long term and immediate effects. Wars only cause destruction, loss of precious lives and massive financial strain to the countries involved. The effects of war are not only felt by the members at war but also by countries around the world.

What is an economy?

Put simply, economy is about goods and services in a particular region (country, area etc) – basically the way in which goods and services are made, sold, and used in that region.

What are goods and services? Goods are physical things – like clothes, cars, food, furniture – anything that is produced and sold. Services are things like teaching, being a doctor or a nurse, or providing software series etc.

What’s important to remember is this – the more production in a country, the richer it is. Same with services. This is because a society creates wealth by producing goods and services – if there is production, then there are jobs, if there are jobs, people have money, if people have money, they spend it, that creates more jobs – both in manufacturing and in services. And this is how a country stays rich and healthy in terms of the economy.

Effect of the war on India’s economy

  • The first and immediate effect on the economy is the rise in crude oil prices (crude oil means unrefined oil) – which has led to a rise in fuel prices.
  • We are already witnessing price rise in everyday food items. This is because of the increase in fuel prices. When fuel becomes expensive, so does the transportation of commodities that criss-cross the country. Automatically the prices of fruits and vegetables and other materials increase.
  • Another, precious commodity that becomes expensive is gold.
  • The price of Sunflower oil has been directly impacted while wheat and some other staples have risen due to an indirect effect of the war, as there has been a shortage of supply from Ukraine and Russia.
  • Chicken prices have risen by 25% since January and will continue to rise due to a shortage of feed.

What is inflation?

Inflation is the decrease in the purchasing power of money, while there is a  general increase in the prices of goods and services.

Whenever there is a war or some unforeseen undesirable circumstances, like a pandemic, economies world over suffer. The first effect is inflation i.e. everything becomes expensive and your purchasing power decreases. This happens to individuals as well as whole countries.

The global economy was already weak in the post-pandemic period which has now been aggravated by the Russian war on Ukraine.

We hope that the war comes to an end soon so that lives can be saved, and huge economies that are precariously recovering from the trauma caused by Covid, can recover and bounce back.

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