Ukraine-Russia conflict: Indian govt could lose Rs 1 trillion revenue, says SBI report

Irrespective of the military objectives, the impact of the conflict will be felt across commodities and asset classes, the report authored by the bank's Group Chief Economic Adviser Soumya Kanti Ghosh said.

Crude oil prices have already crossed USD 100 per barrel (now USD 105 per barrel), and other commodities which will see inflation include precious metals gold, palladium and platinum.

If the Government reduces the excise duty on petroleum products and preventS the prices of petrol and diesel from rising, then it will incur excise duty loss of Rs 8000 crore for a month.

“And if we assume that the reduced excise duty continues in the next fiscal and assuming petrol and diesel consumption grow around 8-10 percent in FY23, then the revenue loss of the Government would be around Rs 95,000 crore to Rs 1 lakh crore for FY23,” the report said.

“In this context, the FY23 budget numbers that are pegged conservatively would act as a clear counter cyclical buffer for such revenue loss,” it added.

The report said Ukraine being important exporter of agriculture products, there will be impact on prices of wheat and corn if navigation lines in Black Sea are disturbed.

“For India which has no strategic interest in this conflict the fall out will be mostly economic. Rise of commodity prices will impact CAD (Current Account Deficit0 and domestic inflation. The export outlook of services towards Europe will be impacted negatively. Sanctions on Russia may impact regular trade (e.g. tea) between India and Russia,” the report said.