The sight of Covid-19 infections nearing its end with business activities returning to normalcy remained shortlived for Indian MSMEs with the recent breakout of the Russia and Ukraine war. According to a survey conducted by Khatabook, the MSMEs have experienced an average dip of 11 percent decline in business volume due to lockdowns in 2021 as compared to 46 percent during the 2020 nationwide lockdown.
India’s MSME sector which forms the bedrock of the country’s GDP seems to have been impacted by ongoing military conflict since a majority of exports to these two warring nations have been led by the Indian MSMEs. India’s bilateral trade with Russia and Ukraine stood at $11.9 billion and $3.1 billion in 2021 and makes Russia India’s 25th largest trading partner with a projected value of $2.5 billion exports and $6.9 billion imports during the April-December period of FY2022.
India’s bilateral trade with Russia and Ukraine stood at $11.9 billion and $3.1 billion in 2021 and makes Russia India’s 25th largest trading partner with a projected value of $2.5 billion exports and $6.9 billion imports during the April-December period of FY2022.
What Indian MSMEs are expected to lose from this war?
Hit on the pharma sector: According to the r Pharmaceuticals Export Promotion Council (Pharmexcil) under the commerce department, India had exported pharmaceuticals worth $591 million to Russia and worth $182 million to Ukraine in 2020-21, which is 12 percent of India’s overall pharma exports to the world. A prolonged war and sanctions imposed on Russian central banks may impact the remittances of outstanding trade receivables. Indian pharma exporters ship consignments every quarter, and if the war continues beyond March the exports will largely be hampered.
Seafood exports are stuck: Seafood exports from India in the past few years have recently gained ground in the global markets. Russia is India’s biggest customer of shrimp as well as cephalopods such as squid, cuttlefish, and octopus. Ukraine currently imports $10 million of seafood from India. Exporters are now staring at losing a market that is developed over the past few years. In 2022, the projection of seafood exports is to be worth $180 million against $150 million from last year. The recent war has caused worth Rs 500 crore of seafood stuck in transit.
The apparel business is hurt: The pandemic laid a rough patch for India’s textile and apparel industry since the weavers went to their hometown for preventing themselves from getting infected by the virus. With the ongoing war, the textile owners are unlikely to get paid on time since the dollar rouble has plummeted to historical lows. In addition to this, the air space restrictions have blocked the trade routes and the EU members have asked Indian exports to put the shipment on hold. This is resulting in a stock pile-up with trade routes getting expensive.
What might be the possible gains from Russia and Ukraine?
Russia and Ukraine together account for almost a quarter of the global wheat supply. Their wheat crop will mature in August and September this year. However, the ongoing war and imposition of sanctions, present an opportunity for Indian wheat exports to fill in the supply void. The total shipment from the country has touched a record of 6.6 million tonnes during the current fiscal. India’s new wheat crop will be available from 15th March as compared to global wheat producers. According to Agriculture Ministry’s second advance estimate, India’s wheat production is projected to touch a new record of 111.32 million tonnes in 2021-22 against 109.59 million tonnes in 2020-21.