Surge in price of masks and shortage of oxygen cylinders due to COVID-19. Impact of Russian-Ukraine War on the economy.

1. Case Study: Economic Events in Relation with Economic Principles
Assignment #1
Pragidiya. M 2211424, Jess. J 2211419, Joe. M 2211439 and Ansh. S 2211405
Department of Commerce, Christ (Deemed to be University)
COSF134: Business Economics I
Dr. Varadurga Bhat
September 16th
, 2022

2. COVID-19
The COVID-19 pandemic's disruptive effects on India's economy are significant. Due to the
closure of several industrial channels, economic growth has slowed. The workforce's reverse
movement and the resulting labour shortage caused economic growth to slow down even
more.
1. Surge in cost and decline in production
The prevention of COVID-19 is possible through various measures such as home medicines,
nutritious liquids, steaming, but the most prevalent among humans and convenient being
‘Face masks’. During the Covid-19 pandemic, face masks were sold in billions and trillions
in quantity nationally and internationally as well.
The Indian surgical mask market was estimated at $58 million during 2017 and is relied upon
to reach $95 million by 2025..
Shortage of face masks has been caused because of Covid-19. Due to Personal protective
equipment is used by healthcare professionals to keep both themselves and their patients safe
from infection and the spread of disease.
Due to a lack of access to items including gloves, medical masks, respirators, goggles, face
shields, gowns, and aprons, doctors, nurses, and other frontline workers are severely
underprepared to care for COVID-19 patients.
To control the ‘face mask’ market globally the governments have stepped up and intervened
the market to control the disruption caused and making sure the proper distribution and
allocation of face masks are made in the economy. Throwing light on one of the economic
principles:-

3. ‘Principle 7: Governments can Sometimes Improve Market Outcomes’
One of the primary challenges faced by the governments battling the pandemic is meeting
consumer demand for face masks. In the subsequent phase of the crisis, when lockdowns are
gradually lifted and economic activity picks back up while the virus still poses a hazard,
masks might play an even bigger role.
● During the Covid-19 outbreak in South Korea, the government required that 80% of
medical masks be distributed as "public masks" at a set price in order to limit the
rising prices of KF94 masks. On July 12, 2020, the sales of KF94 masks returned to
the free market, and the mask costs immediately decreased, protecting public health
and halting the spread of the pandemic.
● Many nations have implemented export limits or analogous policies, such as making
it mandatory for governments to buy all available stockpiles, to address the domestic
mask shortages.On January 24, 2020, Chinese Taipei became the first country to
impose an export restriction on masks. Since then, numerous other countries have
jumped on board.
● No nation can provide the rising demand for face masks on its own. As governments
encourage businesses to transfer production and businesses recognise new business
prospects, certain nations have built up additional production capacity, and supply is
anticipated to rise further.
The government's intervention had the desired effect of bringing down mask costs and
helping the country recover from the COVID-19 pandemic's mask scarcity. The government
should only intervene briefly, and after the crisis has passed, the free market system should be
reinstated.

4. 2. Surge in demand for Oxygen Cylinders
Optimal medical infrastructure utilization became a high priority for Governments worldwide
during the COVID-19 pandemic. Special attention is drawn to both the import and local
manufacture of medical oxygen gas to ensure its uninterrupted supply to designated
COVID-hospitals identified by the local administration.
Initially the disruption in the supply of oxygen for industrial use temporarily impacted the
revenues of small and mid-sized companies into metal fabrication, automotive
components, shipbreaking, paper, and engineering. These (SMEs) typically did not have
captive oxygen plants and source their requirement through merchant suppliers for
operations such as welding, cutting, cleaning, and chemical processes.
In relation to Principle 7, “Governments can sometimes improve market outcomes”, we
can conclude that government undertook many measures as to improve the country’s
economy and to solve SMEs problems.
Additional tankers were airlifted from abroad, tankers used for liquid argon and nitrogen
were converted to carry oxygen, and the railways innovated to introduce special “Oxygen
Express” trains.Industrial oxygen was diverted from steel plants to hospitals and the
procurement and distribution of oxygen concentrators was stepped up.
Government specialists recommended a significant hike in the production of medical
oxygen, a process that has already begun: more than a thousand new plants were funded
by the Government, producing 1,750 metric tons of oxygen every day, and more plants
have been set up with regional and private sector backing.
Principle 6, Markets are Usually a Good Way to Organize
The creation of “buffer storage” facilities, at strategic locations, so that oxygen can be
delivered far more quickly during emergencies. The Indian Government, technical

5. partners, and private agencies have worked closely to estimate India’s future demand for
oxygen.
Some state governments such as that of Uttar Pradesh repurposed tankers used for other
liquid gases to service the transportation of medical oxygen; they utilised technology, too,
and tagged tankers to get real-time data on their location.
In India, the Central government collected data on oxygen beds and ICU beds from all
COVID-19 hospitals in each state and allocated a certain quantity of oxygen to the state,
according to the amount that was deemed necessary for the treatment of every patient.
The court ordered the Centre to place on record the notification on fixing MRP of oxygen
concentrators and capped trade margin on the prices.
According to Inox India, which produces 50% of India’s oxygen medical supply, it said
India has enough potential and capacity to meet the surge in demand but the transport of
gas is a major hindrance. Overall capacity was 40% in excess of demand, the stock was
maintained in the east but it was demanded way more in the west. So that’s where
transport and logistics poses a challenge to the markets.
Therefore government intervention and market organization really improved the stability
of the economy and helped the country recover from the pandemic byoptimal utilisation
and right allocation of oxygen cylinder resources.
References

6. ● Business Today Desk. (2022, January 12). COVID-19: Centre asks states to ensure
buffer stock of oxygen for at least 48 hrs. Business Today. Retrieved September 16,
2022, from
https://www.businesstoday.in/coronavirus/story/covid-19-centre-asks-states-to-ensure-
buffer-stock-of-oxygen-for-at-least-48-hrs-318759-2022-01-12
● Frayer, L., & Pathak, S. (2021, May 5). Why Is India Running Out Of Oxygen?
NPR.org. Retrieved September 16, 2022, from
https://www.npr.org/sections/goatsandsoda/2021/05/05/989461528/why-is-india-runni
ng-out-of-oxygen
● Just a moment. . . (n.d.-b). Retrieved September 16, 2022, from
https://www.orfonline.org/research/preventing-a-repeat-of-the-covid-19-second-wave-
oxygen-crisis-in-india/
● Kashyap, S. (2021, July 16). Mask Making in India: An Investigation into its future
after the Pandemic. ProjectStatecraft. Retrieved September 14, 2022, from
https://www.projectstatecraft.org/post/mask-making-in-india-an-investigation-into-its-
future-after-the-pandemic
● The face mask global value chain in the COVID-19 outbreak: Evidence and policy
lessons. (n.d.). OECD. Retrieved September 14, 2022, from
https://www.oecd.org/coronavirus/policy-responses/the-face-mask-global-value-chain
-in-the-COVID-19-outbreak-evidence-and-policy-lessons-a4df866d/#section-d1e338
● Just a moment. . . (n.d.). Retrieved September 14, 2022, from
https://www.researchgate.net/publication/352111752_Government_Intervention_and_
the_Price_of_KF94_Masks_in_the_Covid-19_Era

7. The Russian – Ukraine War
On February 24th
, Russian leader Vladimir Putin launched a “full-scale invasion” on its
neighboring nation Ukraine. This lead to a war that has had a large impact on the global
supply chain, creating inflation in many different countries, slowing down the flow of goods,
dramatically increasing fuel prices and creating food shortage around the globe.
1. Impact of the war on Oil and Gas supply
The ongoing Russia-Ukraine war has severely set back the global economy in terms of flow
of goods especially for oil and gas. Russia being the world’s 3rd
largest oil producer and 2nd
largest producer of crude oil and the largest exporter of crude oil, accounts for about
one-sixth of the global oil and gas supply.
The Indian economy had slowly started to recover from the COVID-19 crisis but the
Russia-Ukraine war has set the economy back to where it started. A country with a limited
amount of oil and gas resources and a huge population like India will find it hard to adjust
with the rising oil and gas prices.
The impact of the rise in oil and gas prices will directly have an effect on the Indian
economy as India imports 85 percent of the required oil. Other than the petroleum products,
the war has also affected India’s edible oil market since India receives more than 80 percent
of its sunflower oil from Russia and Ukraine.
The inflation at present is already out of the RBI’s control, and it may go up even higher not
just due to the increase in crude oil prices but also due to the increase in edible oil prices as
well.

8. Principle 7:Governments Can Sometimes Improve Market Outcomes
This principle states that market failures occur when the market fails to allocate resources
efficiently. In the case of India at present, there is a shortage of supply of oil and gas in the
Indian economy. The principle additionally states that respective governments can step into
the market and intervene in order to promote efficiency and equity. In the case of the rise in
oil and gas prices the governments can intervene and reduce the import duties and tax on oil
and gas products to ease the burden on the oil and gas companies as well as the Indian
households.
A similar step has been taken by the government on the 4th
November 2021 where the
excise duty on petrol was reduced by Rs 5 and that on diesel reduced by Rs 10. The states
were also urged to reduce the Value Added Tax on diesel and petrol. The decrease in diesel
prices were proven to be helpful to the farmers for the Rabi season as well as for the ordinary
consumer in reducing his/her burden.
The government of India being aware of the current challenges faced by the petroleum
value chain, constantly works towards introducing policies that remove the restrictions and
barriers for domestic production to promote the same. The government also has taken
initiatives to delink the oil and gas from mining activities which would enhance the
exploration and production activities for oil and gas leading to discovery of new oil fields
suitable for oil and gas production.

9. 2. SWIFT Sanctions on Russia
What is SWIFT ?
SWIFT or the Society for Worldwide Interbank Financial Telecommunications,
headquartered in Belgium is vast inter-bank messaging network with more than 11,000 global
members It connects around 200 countries around the world making it the most commonly
used system in the world. SWIFT Facilitates the movement of money. This interbank
messaging network allows financial institutes to more securely transmit information with
each other. Iran, Venezuela and North Korea are the only 3 countries to be cut off from it.

10. How does this Impact Russia?
Banning Russian financial Institutions from the SWIFT Network freezes their ability to make
transactions with the rest of the world. Since SWIFT is such a vast network, if one institution
is not part of that network, communication with other banks would be time consuming. The
sanctions therefore hinder the movement of money into and out of Russia which could lead to
higher inflation. Imposing of these sanctions also caused the people of Russia a fear and
distrust in using credit cards for day-to-day purchases making them withdraw tremendous
amounts from ATM’s. This ban basically excludes Russian banks from executing its and its
customers financial transactions with foreign banks, paralyzing all sectors of the economy
that are engaged in international activities.
Principle 9: Prices Rise When the Government Prints Too Much Money
Inflation is the increase in the overall level of prices in the economy. With these sanctions on
Russia its ability to make transactions with the rest of the world will be severely disrupted.
Russia’s ability to import both raw material for goods and finished goods will be damaged.
Russia’s ability to export its products to the rest of the world will also be hindered reducing
the amount of money that goes into the country.
With these import and export restrictions, standard of living for Russian citizens will fall
down, with lessened supply of goods demand for said goods will increase, raising prices and
causing an inflation.

11. References
● How the SWIFT Banking System Works. (2022, July 7). Investopedia. Retrieved
September 15, 2022, from
https://www.investopedia.com/articles/personal-finance/050515/how-swift-system-wo
rks.asp
● Rebucci, A. (2022, March 8). SWIFT Sanction on Russia: How It Works and Likely
Impacts | Econofact. Econofact | Key Facts and Incisive Analysis to the National
Debate on Economic and Social Policies. Retrieved September 15, 2022, from
https://econofact.org/swift-sanction-on-russia-how-it-works-and-likely-impacts
● Pitofsky, M. U. T. (2022, February 27). What is SWIFT? How could banning Russia
from the banking system impact the country? USA TODAY. Retrieved September 15,
2022, from
https://eu.usatoday.com/story/money/2022/02/24/swift-russia-banking-system-sanctio
ns/6930931001/
● Muqsit, A. (2022, May 10). The war in Ukraine: A moment of reckoning for the oil
and gas industry. Retrieved from
https://www.accenture.com/us-en/insights/energy/ukraine-oil-gas#:~:text=An%20exp
anded%20scenario%20based%20on,%24150%2D%24200%20per%20barrel.
● Sanjay, K.K. (2022, April 28). Russia-Ukraine war: Impact on India's petroleum
sector. Retrieved from
https://energy.economictimes.indiatimes.com/energy-speak/russia-ukraine-war-impact
-on-india-s-petroleum-sector/5243
● Beth, S. (2022, June 28). Ripple effects from Russia-Ukraine war test global
economies. Retrieved from
https://mitsloan.mit.edu/ideas-made-to-matter/ripple-effects-russia-ukraine-war-test-gl
obal-economies#:~:text=The%20Russia%2DUkraine%20war%20is,MIT%20Center%
20for%20Transportation%20and
● Mayank, A. (2022 March 15). Ukraine-Russia war jolts India’s import-dependent
edible oil market. Retrieved from
https://www.aljazeera.com/economy/2022/3/15/ukraine-russia-war-jolts-indias-import
-dependent-edible-oil-mkt
● Bhaswar, K.K.V.V. (2022 March 9). India's economic challenges amid soaring crude
oil price. Retrieved from

12. https://www.business-standard.com/podcast/economy-policy/india-s-economic-challe
nges-amid-soaring-crude-oil-price-122030900092_1.html