The Price of War: How Ukraine Conflict Is Reshaping India’s Financial Outlook
Images Credit - Taxguru
On February 24, 2022, Russia launched a full-scale invasion of Ukraine after a long haul of diplomatic face-offs, triggered by the US presence in Russia’s neighbourhood. As the world looked on, the war spread destruction and casualties while also disrupting geo-political as well as geo-economical status everywhere. Even as the frontlines continue to shift with every major offensive & counteroffensive, neither side seems closer to decisive victory. But its impact is far-reaching, even 4300 KM away, up to India.
Because of the Russia-Ukraine conflict, India’s financial outlook (2025-26) is a complex tapestry of tension, realignment, and domestic economic strategies. It is time to take a fresh look at the key factors that are still influencing Indian economy, despite the war having been on for three years now .
1) Investment Climate – The investment climate in the Indian private sector could get hindered because of continued disruption in global supply chains and resulting increase in the prices. The Finance Ministry has already highlighted that the geopolitical uncertainties pose serious risk to the nation’s economic growth for the fiscal year 2025-26. This economic hesitation could get prolonged because of affect the private sector investment. As a reflection of this hesitation, the International Monetary Fund (IMF) recently downgraded India’s growth forecast from 6.5% to 6.2%.
2) Energy Imports & Trade Realignments – India’s strategic increase in imports of discounted Russian oil, especially the ESPO Blend, reached its highest levels in April 2025. With Russia accounting for 36% of India’s total imports for the year 2024-25, there is a clear shift in the country’s import policy. The shift towards Russia has resulted in a record low in the OPEC countries’ share in our oil imports and it shows no signs of changing any time soon, especially if the Chinese demand remains subdued.
3) Inflation & Commodity Prices – The Russia-Ukraine has had the most impact on global food supply chains. Since India relies on global imports for both energy and agricultural products, it faces challenges in terms of soaring prices and supply shortages. The cascading effect of increased prices for essential commodities will get amplified in the domestic scenario, increasing food price inflation and affecting both the Indian seller and the consumer.
4) Strategic Autonomy & Diplomatic Balancing - India’s neutral stance vis-à-vis the conflict has proved to be beneficial so far, as in the country continues to focus on its own strategic interests. Without criticizing Russia for its actions, India has continued to seek global engagement in restoration of peace in the region. This fine-balancing of diplomatic relationships has taken a slight toll on India’s bilateral relationships with other first-world countries such as the US, Germany, and the UK. But in return, India’s economic interests as well as its security concerns remain safeguarded amid constantly shifting global alliances.
5) Domestic Indicators – Despite the world facing an overall economic uncertainty, India’s domestic economic indicators continue to be resilient, displaying the nation’s inherent economic mettle. The key indicators of India’s economic health are showing signs of robustness, be it the credit growth, tax collections, or Foreign Direct Investment. In fact, the Gross GST collections for April 2025 stand at Rs 2.36 lakh crore, which is a 12.6% increase over the gross collections of April 2024. There was also a 9.1% growth in the net GST collections for April 2025.
The Indian economy, thus, is resilient and the cooperative federalism is working fine!
Therefore, it won’t be wrong to say that India’s financial outlook, in wake of the ongoing Russia-Ukraine war, is characterized by cautious optimism. The domestic economic indicators provide a buffer against external geopolitical tensions. However, the government needs to be constantly vigilant and keep adaptive policy measures handy, if we are to ride this tide safely!
(The writer is a seasoned Banker and Mortgage Specialist working for India’s largest loan distributor company and occasional political commentator.)
