`History has taught us that markets do recover after the war but the History hasn’t taught us how to predict the end of a war and its after-effects. The Russia-Ukraine conflict has rattled markets around the world.
With the Russia-Ukraine crisis set to impact global trade flows severely, India’s exporting community is keeping a close tab on the evolving situation. In the event of trade and financial sanctions on Russia, exporters would need to resort to course corrections.
The impact of multidimensional sanctions on Russia is increasing the fear of redistribution of foreign inflows from emerging markets to western financial markets that are handling its worst ramification of the Russian invasion of Ukraine.
Adding new magnitude to the sanctions, the delink of Swift messaging services for some of the leading Russian banks is causing not only concern to their local entrepreneurs but is also having an impact on other economies that have strong trading ties with Russia.
Impact on Indian financial markets
With the active association of a large number of foreign institutional investors (FIIs), the external sector shocks and tremors quickly overwhelm the domestic stock markets. The BSE Sensex is down to its lowest level of 52843 on March 7, 2022, from a peak of 61766 in October 2021. With razing levels of invasion without any sign of abatement, the losses could be deeper. Though markets will adjust to the downturn and the global central banks will wait to move towards normalization in view of the conflict, the market uncertainties are poised to exacerbate.
The weak rupee against US $ is another major macroeconomic concern leading to a widening current account deficit (CAD). Rating agency ICRA expects CAD to widen to 3.2 percent in FY23 if the crude prices continue to stay elevated at a threatening level. The bond yields may hover in the range of 7.0 – 7.4 percent during HI of FY23 raising the cost of borrowings of the government to meet the monetization of the fiscal deficit.
The USD -INR cross rate may stay range-bound between Rs.76 – 79 until the conflict subsides and forex flows are regulated. The continued fall of the rupee is pushing exporters into new dimensions of exchange rate risk. The rupee touched a low of76.97/$, the lowest ever after plunging 1.05 percent against the dollar. Intraday, the rupee hit 76.98/$, prompting the state-run banks to sell dollars on behalf of the Reserve Bank of India (RBI). This fall was the fifth occasion when the rupee fell over 1 percent in the day.
The previous all-time low for the rupee was recorded on April 16, 2020, when it closed at 76.87 against the dollar. Indian rupee lost 3.5 percent during 2022 as against Korean Won ( -3.02 %), Philippine Peso (-2.25 %), Taiwan Dollar (-2.10), and Singapore Dollar (-1.05) but the Chinese Currency Renminbi appreciated by 0.55 percent.
The country’s micro, small and medium enterprises (MSMEs), already reeling from the fallout of the pandemic, have enough reasons to be worried about the crisis. These small businesses are responsible for about 50% of the country’s outward shipments.
Animesh Saxena, President of the Federation of Indian Micro and Small & Medium Enterprise (FISME), points out that the crisis impacts MSMEs at multiple levels. “We expect significant currency fluctuations as the dollar will be very volatile. For MSMEs, energy prices are already skyrocketing.
There is a spectrum of views on inflation and the economy’s ability to tolerate it. Energy prices will go up sharply as crude oil and coal prices spiked as a result of the current crisis involving Ukraine and Russia.
Impact on Advertising and Digital media
While there is still uncertainty about the duration of the war, unforeseen development, and new sanctions, the tech community must react to this evolving situation with short- and long-term planning, to minimize the spillover effects on their economies and digital markets.
Consumers want brands to take concrete measures addressing Russia’s invasion of Ukraine, a reflection of growing public awareness of the influence companies wield over major global events and widespread concern over the conflict. Despite these expectations, marketers should not rush to wave their flag around a situation that is fast-moving and highly sensitive — though many organizations may have already learned that lesson following two years marked by society-wide crises.
Still, the marketing industry is taking action. Already, a number of marketers and service providers have cut back or stopped doing business in Russia while industry event Cannes Lions said it would exclude Russians from this year’s festival.
Weaker demand for traditional communications combined with a clear pressure to take some sort of meaningful action puts marketers in a bit of a bind in the near term, but they should still be strategizing for a moment where receptiveness to consumer-facing messaging is higher.
In separate and independent efforts, the Ukraine government and Crypto.com are supporting Ukraine with NFT collections. Ukraine’s collection, dubbed “Meta History: Museum of War,” documents the timeline of Russia’s invasion and will funnel proceeds to Ukraine’s army and civilians.
Nestlé was 2021’s largest non-Russian advertiser in Russia, with an ad spending of 6.12 billion Russian rubles or roughly 81.5 million U.S. dollars at December 31, 2021 exchange rates. The top international advertisers presented in the data set invested approximately 812 million U.S. dollars in advertising in Russia that year. The Russian ad market was valued at 7.22 billion U.S. dollars, which gives the top non-Russian advertisers a market share of 11 percent.
Many service providers like Accenture, BCG, and McKinsey are similarly making a swift exit from the country, along with services like Meta which has also blocked Russian state-backed media accounts in Ukraine and the European Union to which Russian regulators have responded by blocking Facebook and Instagram in the country.
Other major brands like Amazon have also has stopped shipping products sold on their retail website to customers based in Russia and cut off access to their video streaming services along with Netflix and Ad tech firm Extreme Reach which has shut down its ad serving and delivery to Russian-affiliated digital and TV destinations, including RT (Russia Today) and RT America, per a statement from the brand.
The world’s biggest beauty marketer, L’Oreal is also temporarily shutting down its brand e-commerce sites in Russia. Unilever and Procter & Gamble Co have suspended all marketing and capital investments as well as all imports from and exports to Russia.
The crisis has proved that the media has the power to play a role in affecting the results and changing the political trends. Media has always been the source of information but with the advancement in the technologies and big user base, social media apps have played a vital role in reforming already shaped opinionsRussia and Ukraine crisis has been the highlighted issue of the media globally but the use of information on social media platforms could affect the government control and could lead to chaos among the audience that is receiving information.
The geographical tensions have given a boost to digitalization as the media houses are more focused on digital trends in this moment of chaos and a rise in buying opportunities Government of each country may give more support policy to drive local social media to grow up. A new spring may come to local content platforms such as social platforms, short video platforms, chatting platforms, and OTT categories.
The crisis might help the local service platforms for daily life to come forward as there is a high risk of western service providers cutting the service if there is political conflict
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