ICRA has said that inflationary pressure could be felt on commodities due to Ukraine crisisMumbai: Rating agency ICRA has said that the short term impact of Russia's invasion of Ukraine on India will be through inflationary pressures, since the country is dependent on imported oil.Some sectors like oil and gas and both ferrous and non-ferrous metals can gain through this trend, while the ones which depend on oil as a key input, like chemicals, fertilisers, gas utilities, refining and marketing, will have a negative impact, ICRAsaid in a report.The agency added that the most important aspect to watch out for will be whetherthe conflict lasts longer and escalates to other parts of Europe.It noted that Russia is a major exporter of fuel, chemicals and metals, and most of the G7 nations have announced sanctions on Moscow, trying to limit its trade, which excludes energy."The macro implications of the geopolitical crisis will stem primarily from the surge in crude oil prices, as Russia does not have major share in India's trade basket," its chief economist Aditi Nayar said.She added that the rupee has been relatively range-bound in 2022 so far, despite elevated crude oil prices, but pessimistic global sentiments along with a stronger US dollar could weaken the domestic currency going forward.The rupee will not depreciate beyond Rs 78 to the dollaron positives like large forex reserves of over $630 billion and the likelihood of the current account deficit coming under 3 per cent despite the surge in crude prices to over $100 per barrel, she added.The agency said Russia accounts for only 1 per cent of the trade, which is mostly related to commodities.Commodity prices are trending at all-time highs, primarily driven by metals and natural gas.
Moreover, oil prices surging close to $100 per barrel has provided further impetus to commodity led inflationary pressures, it noted.