Economic Survey for 2022-23 takes into account Russia-Ukraine war and India's 'unique' opportunity

The Economic Survey for 2022–23 took into account the damage caused by the Russia–Ukraine war to the global economy as it was staging a recovery from a COVID-induced slowdown. The survey highlighted how the conflict led to rising inflationary pressure and disruptions of key supply chains that were recovering from the pandemic impact.

In the first half of FY23, the conflict slowed the flow of FDI in manufacturing. Prices of key inputs for industries like oil and metal spiked. Foodgrain and edible oil prices also surged in the wake of the conflict.

According to the survey, the Russia-Ukraine war fueled global inflation, leading several central banks to raise interest rates to combat increasing costs. This put pressure on emerging market currencies like the rupee, which exacerbated inflationary pressures.

"It all started with the pandemic-induced contraction of the global output, followed by the Russian-Ukraine conflict, leading to a worldwide surge in inflation. Then, to combat inflation, central banks around the world, led by the Federal Reserve, responded with synchronised policy rate hikes. The rate hike by the US Fed drove capital into the US markets, causing the US Dollar to appreciate against most currencies. This led to the widening of the Current Account Deficits (CAD) and increased inflationary pressures in net-importing economies.

According to the survey, as companies build supply chain resilience in the wake of the pandemic and the Russia-Ukraine conflict, India has a unique opportunity to become a global manufacturing hub.

"The pandemic and the Russia-Ukraine conflict have demonstrated the risk of supply chain shocks to the global economic order. As companies adapt their manufacturing and supply chain strategies to build resilience, India has a unique opportunity to become a global manufacturing hub this decade."

It was also claimed that the war caused rising housing prices due to increases in construction material prices.

"The Russia-Ukraine conflict has further affected the supply chain, resulting in price escalations of steel, cement, finishing materials, imported chemicals, and fuel, thereby increasing the overall construction cost and resulting in a rise in housing prices."