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Startup India: how the Ukraine crisis can affect

the invasion of Ukraine is a story that impacts all of us, whether we’re on the ground there or not. And it’s hard to celebrate funding round when scary times are the moment. undoubtedly, being felt across Ukraine’s wider startup ecosystem, which includes not only hundreds of startups and large firms but also research and development offices for some of the world’s biggest tech brand

As the Russia-Ukraine crisis escalates, India’s information technology and business process management industry is on a wait-and-watch mode. Even though Indian IT companies do not have large operations in Ukraine, they have big centers in Eastern European countries like Hungary, Romania, Poland, and the Czech Republic, where business continuity plans are being activated. But Companies like HCL Technologies are assessing the situation to track employee and client dependency .( according to ET )

there are about 50,000 tech workers and 200,000 odd technology freelancers in Ukraine who could be affected by the hostile situation, in turn impacting operations across tech companies globally.

Ukraine itself has many more home-grown startups that are also feeling the fallout. They include Ajax, a home wireless security company; the AI-based grammar and writing engine Grammarly; the face-swapping app Reface; pet camera system Petcube; People AI, the sales and marketing intelligence startup; and language tutor marketplace Preply. These companies have raised funding from some of the world’s biggest VCs and one question will be how and if those relationships will be impacted by the latest developments.

The current situation in Ukraine is increasingly getting complicated and hard to understand what's going to happen next but isn't it always hard to understand what's going to happen next? But in the language of finance, we can always estimate by analyzing the current situation.

 The current situation in Ukraine is increasingly getting complicated and its increasing impact on the startups
startup in India getting effected by Ukraine crisis

Collateral damage vs weapon attack

President Biden announced a "first tranche" of economic sanctions on two Russian banks with about $80 billion in assets and five Russian oligarchs and their families and prohibited U.S. entities from purchasing Russian sovereign debt. More sanctions are expected to follow in response to what Biden said is a "needless act of aggression against Ukraine and global peace and security.”

As the situation is getting worse, we can see financial restrictions will have a butterfly effect in the future as nobody is supporting Russia right now, when the situation will be stable they will be a change in the international alliance. Economies that rely heavily on trade with Russia are somewhat insulated from direct consequences. Europe is more directly affected. But certain sectors of the different economies rely on highly specific Russian exports, primarily raw commodities will get affected too.

Gas prices could rise and touch new high every day

In the early hours following Russia's invasion, Brent crude oil was trading at more than $100 per barrel for the first time since 2014, crisis can have a multi-dimensional impact on the Indian economy depending upon how long the tension simmers. Since Russia is an important supplier of energy (crude oil and natural gas) to the rest of the world, the primary manifestation of this geopolitical unrest would be on India’s inflation and its twin deficits, it will have an impact on the startup who closely work with the energy sectors or depend upon it and will affect the others businesses as the increasing energy prices will Trigger the inflation and increase the cost of operation of running a business.

Other industries, from food to cars, might also be hurt

Russia is a major exporter of rare-earth minerals and heavy metals — such as titanium used in airplanes. Russia supplies about a third of the world's palladium, a rare metal used in catalytic converters, and its price has soared in recent weeks over fears of a conflict. Fertilizer is produced in major quantities in both Ukraine and Russia. Disruptions to those exports would mostly affect agriculture in Asia,

but food prices around the world could rise as a result.

The overall impact on inflation could run beyond fuel items as Russia and Ukraine put together are important sources of sunflower oil, fertilizers, and palladium for India.

Global markets could drop in volatile environment

The invasion rattled investors Wednesday, with Dow futures down more than 2% before the markets opened in the United States. Markets across Asia also dropped. The invasion sent the prices of traditional investment safe havens higher, with gold up more than 1.5% overnight.

After some respite from the selloff on Friday, stocks once again came under selling pressure on Monday, following a 5 percent surge in oil prices after Russia put its troops nuclear-ready amid harsh sanctions on its banking system by the West. While taking the recent geopolitical tensions into consideration, including Crimea annexation of 2014, the Iraq war, and the Afghanistan war, KR Choksey PMS in a study suggests that Nifty50 usually corrects 31-37 percent on an average in a bull market and that the recovery post bottom formation takes about 4-6 months in case of war crisis and around a year or two in case of consequential events.

world economy affected by this war
world economy affected by this war

To conclude

many of the IT companies will be in wait and watch mode now as the safety of employees will be a priority. This will slow down the expansion in the region, which could be a net positive for the Indian IT firms since this would bring more work to India.

“There is a very high likelihood of many IT and business process support services being shifted to India as this crisis plays out. The Philippines will also benefit with its language and customer support depth
(Aditya Narayan Mishra, CEO, CIEL HR Services)

While importers could run down inventories in the short-term, persistence of the crisis could lead to higher prices in these products in the medium term. In a nutshell, the Russia-Ukraine crisis if persists for long, can reduce India’s fiscal buffers, increase INR’s sensitivity to global volatility, keep inflation risks elevated, and prompt the RBI for moving forward on monetary policy normalization.

All enterprises should be prepared to use Eastern Europe as a technology delivery location or not. Firms should

1) heighten awareness of cyber risks,

2) review internal and external communication plans,

3) continue to be diligent in patching systems,

4) ensure backup technology and resources are ready and available,

5) ensure open lines of communications with third-party technology providers that may also be compromised.

In this digital world where the ease of doing business is considered the key factor, should also be able to adapt to the current crisis situation of the world.

Do share your opinion and doubts to discuss the topic further ahead

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