Middle East crisis: How could prolonged conflict shrink Gulf money and hurt India’s households?

Billions of pounds flow annually from the Gulf into Indian households, funding school fees, housing and daily expenses. This inflow is a financial lifeline. As conflict intensifies in the Middle East, that lifeline is coming under strain. India remains the world’s top recipient, drawing a record $138 billion last year. A prolonged war now risks wiping out up to $10 billion, raising the prospect of distress for millions of families.

Remittance backbone faces Gulf exposure

Remittances are central to India’s external finances, accounting for about 3.5% of GDP. These inflows often exceed total foreign investment and help finance imports, providing a buffer during global shocks.

Yet dependence on the Gulf is significant. Nearly 38% of remittances originate from six Gulf Cooperation Council (GCC) nations, including the UAE and Saudi Arabia. Around 10 million Indians work in the region, many in construction and hospitality. These sectors are particularly vulnerable during conflict. While the United States has emerged as the single largest source at 27.7%, the Gulf remains the primary hub for blue-collar employment, leaving incomes exposed to regional instability.

Uneven impact across remittance-dependent states

Any slowdown will be unevenly distributed. Maharashtra and Kerala together receive about 40% of total inflows. In Kerala, where 80% of the overseas workforce is based in the Gulf, remittances underpin real estate and retail demand.

Tamil Nadu, Uttar Pradesh and Bihar also have substantial exposure. If conflict persists, key Gulf sectors such as tourism and oil may slow, affecting wages and employment for Indian workers. Experts warn that a 10% to 20% decline in Gulf remittances would significantly dent local consumption in these sending states.

Evacuations rise, long-term gaps persist

New Delhi has responded to the immediate crisis. Since the Israel-Iran conflict escalated in February, more than 375,000 citizens have been repatriated. Embassies are operating 24/7 helplines, with diplomatic channels active to support those remaining.

Critics, however, describe the approach as "reactive". While emergency evacuations are seen as effective, gaps remain in long-term planning. The government lacks granular data on high-skilled workers and women in domestic roles, complicating outreach during crises.

Returnees also face a "mirage of reintegration". Many come back with limited savings and encounter weak job prospects and support systems. Without a framework to track migrants and facilitate reintegration, vulnerabilities in India’s migration system remain exposed.