The crisis in the Middle East has not only created a crisis of crude oil and gas, but has also created a new fear on the foreign money coming into India. According to Crisil Ratings, the ongoing conflict in West Asia may have an impact on remittances coming to India, because one-third of the total money coming from Indians living abroad comes from Gulf Cooperation Council (GCC) countries.
In a note issued on the West Asia conflict, the agency said that India’s current account deficit (CAD) could be adversely affected due to the decline in the income of Indians living abroad. The agency said the decline in their income could have an impact on India’s CAD, and this at a time when the trade deficit is already under pressure.
Remittances may be affected
India is the world’s largest beneficiary of remittances coming from Indians living abroad. India is expected to receive more than $135 billion from this item in the financial year 2025. There may be some slowdown in the country’s exports due to disruptions in global trade flow due to the West Asia conflict and slow global economic growth, but the low tariffs imposed by America are expected to support exports to some extent. Under its ‘base case’ scenario, CRISIL also estimates that India’s import bill could increase due to an 8-9 per cent increase in crude oil prices on a year-on-year basis.
India’s exports to GCC
The report said that India’s exports to West Asia have been affected due to logistics challenges and supply chain changes due to the West Asia conflict, although the results may be mixed. The report further states that India has exported goods worth $57 billion (13 percent of India’s total merchandise exports) to the Gulf Cooperation Council (GCC) countries and $9 billion (2 percent) to other countries in West Asia. The GCC countries include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE); Whereas other countries of West Asia include Iran, Iraq, Israel, Jordan, Lebanon, Syria and Yemen.
Why is the Gulf region important for India?
In case of some specific products, this sector has special importance for India. For example, more than 70 percent of India’s basmati rice exports, 30 percent of boneless beef, 25 percent of ceramic products, 15 percent of petroleum products, and 20 percent of gems and jewelry are exported to this region. The report said that India’s exports to West Asia are being affected due to logistics challenges and changes in the supply chain.