How Russia-Ukraine War Is Set To Positively Impact India's Rural Economy

The ongoing war between Russia and Ukraine is all set to positively impact the country's rural economy, the Mumbai-based brokerage firm Prabhudas Lillladher said in a report authored Amnish Aggarwal, director of research. "While Russia Ukraine war has spiked commodity prices, there could be silver lining for India with upsurge in rural sentiments and demand in coming months," Prabhudas Lilladher said.

Russia Ukraine war has created a silver lining for Indian agriculture by disrupting global Agri commodity chain due to supply disruptions and that augurs well for the rural economy, Prabhudas Lilladher said. 

“Ukraine is amongst largest global exporters of wheat, sunflower, barley, rapeseed and maize with share of 10 per cent, 47 per cent, 17 per cent, 20 per cent and 14 per cent of global exports. Russia also has strong presence with global exports of 25 per cent, 18 per cent and 14 per cent in sunflower, wheat and barley. We note that prices of wheat, mustard, barley, Cotton and soybean are up by 14 per cent, 30 per cent, 76 per cent, 61 per cent and 36 per cent. We believe rabi crops like wheat will give an incremental profit of Rs 30,200 crore and major crops Rs 57,800 crore, an increase of 32 per cent year-on-year," the Mumbai-based brokerage said.

The report added that expectations of a normal monsoon season after third consecutive normal monsoon will further boost rural sentiment in coming months.

"Skymet has predicted 96-104 per cent of LPA of monsoons in 2022 which will boost rural sentiments in coming months. We believe harvesting of Rabi crop amidst firm Agri commodity prices and timely onset of monsoons will revive rural demand in coming months," Prabhudas Lilladher added.

"Some Mandi participants believe that sustained global supply chain disruption and export demand can further lift prices up by 20 per cent for wheat, once the harvest season is over," Prabhudas Lilladher said on their interactions with experts from Rural India.

Rural experts opined that post harvesting of crop and clarity on monsoons, rural demand is expected to bounce back strongly which will kick start another growth cycle in the economy.

“In Madhya Pradesh, wheat is being harvested presently and is trading in price range of Rs. 22-28/kg versus Rs18-19/kg last year, going upto Rs30-35/kg for high quality “Sharbati” wheat. The prices of soybean has also seen a sharp jump, trading at Rs 70-80/kg from Rs. 40/50/kg last year. Mustard, the second most important rabi crop in India has seen a 30 per cent higher sowing in FY22 versus FY21 and will be the second largest contributor to farm income this year. Mustard prices are up 30 per cent YoY from Rs. 50-60/kg to Rs 70-80/kg,” Prabhudas Lilladher said.

The brokerage firm added that the employment and wages in rural areas is set to pick up owing to various infra initiatives of the government will increase employment opportunities.