In charts: The good & bad of Indian economy 6 months post Russia's invasion of Ukraine

NEW DELHI: Six months ago, this day, Russia invaded Ukraine and rattled one city after another. What followed was not just social outcry but also economic slowdown. Disruption to 2 major trade routes, Russia and Ukraine, along with subsequent sanctions imposed on Russia by different economies, had a major impact on global supply chains. As a result, oil prices surged to record highs, which in turn pushed up inflation. The spillover effect fell upon India as well. In line with global cues, stock markets tumbled, inflation soared to record high, rupee plunged and forex reserves took a hit. This was the 2nd major blow -- for not just India but global economy as a whole -- after the onset of Covid-19 pandemic in 2020. The war pushed pandemic-battered economy into yet another period of uncertainty, right when things were looking positive and all economies were recovering gradually from the Covid shock. Interestingly, while some aspects of the slowly recovering world played out as expected, there were a few surprises as well. For India, the impact wasn't felt as much as other major economies. Despite volatility, the Indian economy has shown resilience and the economic pain seems to be easing for certain key indicators. For others, long route to recovery awaits. Here's a look at how economy behaved in last 6 months:* GDP growthThe actual impact of Russia-Ukraine war on India's gross domestic product (GDP) growth will be clear when the government releases economic data for the period April-June on August 31. According to a report by SBI Ecowrap, India's GDP is expected to be much higher in Q1 of FY23. Growth is expected to be around 15.7% with a large possibility of an upward bias. In the same quarter last year, India's GDP grew by a whopping 20.1%, mainly on account of low base effect. Looking at the economic activities that persisted during the last 6 months, the impacted of war seems to be much lower than that of the pandemic. The economy had suffered a technical recession in Q1 of FY21 in wake of nationwide lockdowns to curb the spread of Covid. Even amid supply chain disruptions since February, the economy grew by 4.1% in the January-March 2022 quarter.* Oil price riseCrude oil prices had jumped to record highs, touching $139 per barrel on March 8. Average crude oil prices increased by $20.1 per barrel on quarterly basis to $99.5 per barrel.Price surged sharply amid concerns over supply disruptions following the geopolitical crisis. Besides, reluctance by Opec+ to increase production capacity of brent crude, also led to supply shocks as demand had started to pick up after 2 years of Covid lockdowns. On June 9, the Indian basket of crude touched $121.28, matching levels seen in February-March 2012, according to data by Petroleum Planning and Analysis Cell (PPAC).As a result, oil marketing companies hiked price of petrol, diesel for a brief period in March-April. Price of domestic LPG, pipeline gas, jet fuel also soared to multi-level highs.However, brent crude prices started easing as fears of recession overpowered fear of supply disruption. * Inflation pressures persist The war and sanctions imposed on Russia took a toll on economies, threatening a further slowdown to global trade volume. Besides, the sharp rise in crude oil prices adversely impacted inflation in India. Retail inflation based on consumer price index (CPI) accelerated to 8-year high of 7.79% in April, mainly on account of rising food and oil prices. Similar effect was witnessed in wholesale price inflation (WPI). It has remained in double digits since the past 15 years. However, in the past few months measures have been taken by Reserve Bank of India (RBI) and government as well to curb domestic prices of key commodities, which helped in cooling inflation. Even though inflation has come down, but it still continues to be on the higher side. It has stayed above RBI's upper band target of 6%.* Food prices ease The war in Ukraine led to surge in food and energy prices amid disruption in shipments of oil, natural gas, grain and cooking oil. While post-pandemic global demand, extreme weather, tightening food stocks, high energy prices, supply chain bottlenecks and export restrictions and taxes have been straining the food market for two years, the recent convergence of all these factors following Russia’s invasion is unprecedented and has sent food inflation rates spiking around the world.Food inflation -- which comprises majority of India's inflation basket -- had been rising since October last year. The jump from February to March showed a sharp uptick and soared further to over 8% in April. As the graph shows, food inflation eased since May after government imposed ban on export of items like wheat.* Stock markets recover One of the common reactions to the war was a fall in investor sentiment globally. Not just India, but stock markets across the world witnessed one of their worst falls since the pandemic. The benchmark BSE sensex fell below 51,000 level as the war continued. Investors became jittery and opted for safe haven assets. The war led to one of worst fall in BSE sensex in the last 2 years. The index crashed nearly 4,000 points in the first 20 days of war and investors witnessed massive losses. However, timely policy measures helped in faster recovery. From its recent low level of 50,921 on June 17, the BSE sensex witnessed an upward trajectory in almost every trading session. It took 40 days for the index to scale past 60,000-mark last week. Interesting, sensex took less number of days to scale up back to 60,000 than over 50 days when it fell from 60,845 in April to 50,921 in June.In other words, sensex jumped 3% in 6 months, compared with 2% fall in S&P 500.* Central bank rates back to pre-pandemic levelWhen an economy grapples with soaring inflation, it is imminent that its central bank will hike benchmark lending rates in order to curb it. In line with US Federal Reserve, which started raising rates since March this year, RBI too resorted to rate hikes. Looking at persistent geopolitical pressures, RBI held an off-cycle meet of its Monetary Policy Committee (MPC) in March and hiked repo rate for first time since August 2018. Till date, there have 3 consecutive rate hikes, taking the total hike to 140 basis points. The policy repo rate now stands at 5.4% -- higher than its pre-pandemic level.* Rupee yet to recoverThe rupee has has weakened 7.5% so far in the 2022 calendar year, trading close to a record low of 80.0650 hit last month, as aggressive rate hikes by the Federal Reserve sent the dollar rallying and commodity prices soared after Russia invaded Ukraine.Even though stock markets witnessed recovery, the Indian currency is yet to see relief. When the war began rupee was priced at Rs 74.57 against the US dollar. It surged past Rs 80-mark earlier this month and is now valued at Rs 79.93 to a dollar. RBI intervened to curb the fall of Indian currency and unvieled a slew of measures like raising overseas borrowing limit for companies, liberalised norms for foreign investment in government bonds, and more.* Shrinking reservesIndia witnessed robust growth in foreign exchange reserves before the war struck. Even during the pandemic, India's forex kitty kept growing.The graph below depicts forex reserves depleted at a faster pace since February. On February 24, reserves amounted to $633 billion. At present, forex amount stands at $570.74 billion. Defending the rupee amid pressures due to rising interest rates in the developed world, high commodity prices and foreign portfolio investment outflows has resulted in heavy decline in the forex assets, which had touched an all-time high of $642 billion in September 2021.* Foreign investors returnForeign institutional investors (FIIs) have been pumping money into Indian equities again. In August till now, they had bought shares worth Rs 16,218 crore. This is in sharp contrast to previous months when FIIs were only interested in withdrawing their money from Indian equity markets. In July, they had recorded an outflow of Rs 6,567.71 crore. However, the outflow in July was much lower than that in previous months. For example, in June itself FII outflows amounted to Rs 58,112.37 crore. Between October 2021 till June 2022, FPIs sold Rs 2.46 lakh crore in the India equity markets.In the first half of this year, FIIs sold stocks worth Rs 2 lakh crore.* Global comparisonIf we compare consumer prices in India with that of other major economies, it will be clear that India is recovering at a much faster pace than others. As mentioned above, retail inflation has cooled from 8-year highs in India, while economies like US, UK and EU still continue to have over 8% inflation. In February, India's CPI inflation stood at 6.1%. Even then, US inflation was higher than that of India's, at 7.9%. At present, CPI stands at 6.7% in India, while UK, US, EU all are at a higher level. Even in terms of economic growth, India is projected to be the fastest growing among major economies, according to International Monetary Fund's (IMF) latest World Economic Output report.