Effect of Russia-Ukraine war: SBI cuts India's GDP growth forecast, the rupee will break further against the dollar

19 days have passed since the war between Russia and Ukraine and the conflict is not taking its name to stop. Both countries are suffering heavy losses from this war and its effect is visible on other countries of the world as well. Meanwhile, India's largest lender State Bank of India (SBI) has slashed India's GDP growth forecast to 7.8 percent due to the Ukraine crisis. Earlier, SBI had projected 8 percent GDP growth.

Rupee may slip up to 77.5

Significantly, the Russo-Ukraine war is becoming a cause of many big challenges for India as well. If we look at the inflation data released on Monday in the country, both wholesale and retail inflation has increased in February. The main reason for this is the rise in crude oil due to the Russo-Ukraine war. Due to the rise in crude oil, pressure on the Indian currency rupee is also increasing. SBI economists say that if the war between the two countries escalates further, the depreciation of the rupee against the dollar will increase further. It has been estimated in the SBI report that by June 2022, the rupee may slip to the level of 77.5 against the dollar.

impact of crude oil prices

Recently, the effect of crude oil prices was also seen on the rupee, when the rupee reached the level of 77 against the dollar due to the rise in the price of Brent crude. Let us inform you that on Monday, the Indian currency declined by 10 paise to close at 76.54 against the dollar in the last trading session. SBI economists also estimate that if the price of crude oil remains at $130 per barrel, then the country's current account deficit will reach 3.5 percent of GDP.

foreign investors withdrawing money

The war between Russia and Ukraine has harmed investor sentiment. Because Russia contributes 14 percent of the global oil supply and 17 percent of the natural gas supply, and due to this war, the fear of adverse effects on the supply chain has deepened. In such a situation, pressure is visible on the rupee in the short term. According to the report, FPIs have pulled out a whopping Rs 2 lakh crore in the October-December quarter. Due to this, the share of FPIs in the Indian markets has come down by two percent to $654 billion, from $667 billion in the previous quarter. This process of withdrawing money continues continuously.

Inflation expected to be up to 5.7%

SBI Chief Economist Soumya Kanti Ghosh said that if crude oil remains at an average price of $130, then the current account deficit can be up to 3.5 percent of GDP. In this case, the average inflation for the next financial year can be up to 5.7 percent. Let us inform you that according to the data released by the government on Monday, the wholesale inflation in the country in February has increased to 13.11 percent as compared to January and it has remained in double digits for the 11th consecutive month. Along with this, the figure of retail inflation in India has also increased to 6.07 percent compared to January.

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