West Asia war may cause 13% loss to India’s Goods Exports, 38% cut in remittances

New Delhi, Apr 10: India may suffer a loss of 13 percent of goods exports and 38 percent of remittance inflows due to the West Asia war, according to an analysis.

It may be noted that the West Asia region accounts for 40 to 50 per cent of India’s oil imports, 13 per cent of goods exports and 8 per cent of foreign direct investment (FDI) inflows.

Ever since the war in West Asia began on February 28, exports to the region have been impacted by logistical challenges and supply-chain realignments due to the conflict.

In the financial year 2025, India imported goods worth USD 122 billion from the Gulf Cooperation Council (GCC) region and West Asia.

In fiscal 2025, India exported goods worth USD 57 billion to GCC countries (13 per cent of India’s total goods exports) and USD 9 billion (2 per cent) to other West Asian countries.

The region accounts for over 70 per cent of Basmati rice exports, 30 per cent of boneless bovine meat, 25 per cent of ceramic products, 15 per cent of petroleum products and 20 per cent of gems and jewellery.

West Asia accounted for 40 to 42 per cent of India’s fertiliser imports in the fiscal years 2025 and 2026.

The highest dependence is on urea, with 64.8 per cent of its shipments coming from West Asia in fiscal 2025.

The region also accounts for over a third of diammonium phosphate (DAP) imports.

Key sectors like Oil hit:

Brent (oil), which saw a major spike due to the war, is likely to average USD 100 per bbl in this fiscal even if the Strait of Hormuz remains partially operational for select countries, including India, according to rating agency Crisil.

Over a period of time, the situation will evolve from a price shock in oil and supply shock in gas to a major price shock, with input costs remaining elevated throughout the year, which will squeeze producer margins.

Pricing power, too, is expected to get restricted amid rising inflation.

As a result, the downside risk to growth is expected to increase, slowing GDP to 6.5 per cent for this fiscal, Crisil said in a report.

Elevated input costs across crude oil, gas and their derived inputs, along with secondary effects on transportation and raw material prices such as packaging, will impact major production sectors.

While manufacturers may switch to alternative fuels wherever feasible and diversify natural gas sourcing, the costs will remain high.

Sectors heavily reliant on liquefied petroleum gas (LPG), with limited fuel flexibility, may face prolonged constraints.

Farming sector:

The agriculture sector also faces risks.

With limited fertiliser inventories being allocated to the kharif crop, additional procurement due to higher prices and therefore its availability for rabi could be strained, affecting food output.

On the domestic front, consumption, which is the strongest driver of growth at present, could soften due to slower agricultural income growth and rising retail inflation.

The report pointed out that consumer price inflation is seen averaging 5.4 per cent in this fiscal, driven by higher fuel costs and second-round effects on core inflation. This will likely prompt tighter monetary policy, it noted.

Implications CAD:

GCC countries accounted for 38 per cent of remittances to India in fiscal 2024, with more than 9.3 million Indians employed in the region, which is likely to be impacted.

A hit to their incomes can have implications for India’s current account deficit at a time when the trade deficit is already under pressure, the report said.

A greater upside to the CAD due to weaker exports, rise in the import bill (particularly due to oil, gas and fertiliser imports) and softer remittance inflow (at least until rebuilding commences in West Asia) takes the CAD ratio to 2.5 per cent of GDP.