West Asia Conflict Disrupts India's Trade

The escalating conflict in West Asia is severely impacting India's trade, particularly with countries directly involved like Israel, Jordan, and Lebanon. India's exports to these nations have plummeted, while trade with neutral Gulf Cooperation Council (GCC) countries has grown. Freight costs have surged, further straining key Indian industries.

The escalating conflict in West Asia is severely impacting India's trade, particularly with countries directly involved like Israel, Jordan, and Lebanon, according to the Global Trade Research Initiative (GTRI).

During January-July 2024, India's trade with these affected nations faced significant challenges. "Exports to Israel dropped sharply by 63.5 per cent, Jordan saw a 38.5 per cent decline due to spillover effects, and Lebanon experienced a 6.8 per cent decrease," GTRI Founder Ajay Srivastava highlighted.

The situation has not affected all regional players. Saudi Arabia, the UAE, Kuwait, and Qatar have so far remained uninvolved, allowing India's trade with these Gulf Cooperation Council (GCC) countries to increase by 17.8 per cent compared to the previous year. However, disruptions in key shipping routes have led to a 15-20 per cent increase in shipping costs, severely impacting Indian companies involved in exporting low-end engineering products, textiles, and other labor-intensive goods.

Despite a 6.8 per cent growth in overall exports to the European Union, sectors such as machinery, steel, gems, jewellery, and footwear have suffered declines. Additionally, crude oil and petroleum imports fell by 32.38 per cent in August 2024, primarily due to reduced demand from Indian refineries and lower orders from Europe. Rising freight costs are expected to worsen trade conditions for industries reliant on high-volume, low-value exports, though potential relief may come if Israel succeeds in neutralizing the Houthis, easing disruptions along the Red Sea.

(With inputs from agencies.)