Iran War Impact on Indian Economy: The Iran-Israel tension is not just a threat of war, it is becoming a major blow to India’s economy. The Commerce Ministry said on Thursday that 56% of India’s exports to West Asia are currently being sent through long routes, due to which both cost and time are increasing. The ministry has presented an assessment of the impact on 6 important sectors.

West Asia is the largest market for Indian basmati, sea products and fresh fruits. Currently, air and sea freight is increasing rapidly. Fresh fruits and vegetables are at risk of spoiling in transit. Basmati’s payment channels are being disrupted and the credit cycle is breaking. An even bigger concern is that the supply of LNG feedstock for making urea is in danger. There may be a crisis of nitrogen fertilizer before the monsoon season.

Everything from engineering goods, iron to machinery is jammed.

This is India’s largest merchandise export category. There is huge demand for iron, steel and machinery in West Asia, but LPG-PNG supply to foundries and machining units is under pressure. Due to this, aluminum supply has also been disrupted.

The entry of Indian engineering goods into the major ports of the Gulf has been disrupted. Ships have to be sent through long routes, due to which transit time is increasing and war risk surcharge is being imposed separately.

Gold is difficult to come by and even to sell.

GCC countries are simultaneously both buyers and suppliers for India’s gems and jewelery industry. On one hand, the export of gold jewelery to GCC is coming to a standstill. Because of this, customized products made for the diaspora cannot be sold anywhere else.

On the other hand, export of gold bars and rough diamonds from GCC is also disrupted and diversification options are limited. On top of this, metal melting and gem processing is being affected due to LPG crisis in the manufacturing cluster.

The biggest bet on the Strait of Hormuz

India is one of the world’s largest importers of crude oil, natural gas and liquefied petroleum gas (LPG). LPG transit routes through the Strait of Hormuz are currently under severe pressure. There is pressure on commercial and industrial LPG supplies. However, the ministry said, “Supply is being maintained through priority allocation for domestic and CNG.

Chemicals and Petrochemicals – MSMEs are not getting raw materials.

Medicine, textiles, agriculture and packaging all rest on petrochemicals. The supply of critical pharmaceutical inputs such as isopropyl alcohol (IPA) and solvents is being disrupted. The prices of polymers like polyethylene (PE) and polypropylene (PP) are increasing rapidly due to which small and medium companies are facing the crisis of raw materials.

The entire chain of medicine manufacturing is shaking

India is the world’s largest supplier of generic drugs and active pharmaceutical ingredient (API) exporter and is in the most critical position. The entire sequence of the crisis is like this…

• Reduction of IPA and solvent by gas reduction.
• This disrupts API production and delays medicine manufacturing.
• Packaging is also becoming expensive.

The cost of High Density Polyethylene (HDPE) and PP is increasing and glass furnaces are at risk of closure which are extremely difficult to restart.

Government’s response

In view of the crisis, the government has announced to increase the Export Credit Guarantee Corporation (ECGC) insurance coverage to 100% and not to increase the premium so that the government assumes the risk of default of payment by the exporters. But there seems to be a big crisis on all import and export sectors.