Washington: India’s economic growth is facing renewed pressure as the ongoing US-Israeli conflict in Iran disrupts its strategic ties with the Gulf region, a cornerstone of the country’s trade, energy supply, and remittances, according to a report by The New York Times.

Just weeks ago, India was viewed as well-positioned among major economies, supported by robust growth, stable inflation and healthy reserves. However, its deep integration with the Gulf, long an economic advantage, is now emerging as a potential vulnerability. 

Energy imports under strain

The Gulf supplies around 40 per cent of India’s crude oil and 80 per cent of its natural gas, making energy security a critical concern. Rising oil and gas prices are already impacting inflation, threatening the delicate balance between economic growth and household affordability.

The Strait of Hormuz, a strategic shipping corridor near Iran responsible for about 20 per cent of global oil trade, remains crucial for India’s energy imports. Any prolonged disruption could strain public finances and exacerbate fuel shortages, including LPG and cooking gas supplies already affecting households.

Trade disruptions and export challenges

India heavily relies on the Gulf as an export market, with commercial hubs such as Dubai serving as key distribution points for Indian goods worldwide. Disruptions to air routes, shipping, and business operations risk slowing exports, adding further pressure to the economy.

Impact on remittances

Remittances from the Gulf are vital for India, accounting for roughly 40 per cent of overseas worker inflows. Around 10 million Indians live and work across Gulf countries, sending home nearly $130 billion annually—a figure comparable to India’s crude oil import bill. Any decline in earnings among these workers could weaken the rupee and amplify fiscal pressures.

Expert analysis

Citing a recent assessment, Goldman Sachs warned that India’s “positive growth story” faces a new broadside from rising energy costs, slower exports, and weaker remittance inflows. Stock markets have already fallen by about 10 per cent in the past month.

Economist Rathin Roy noted that India must closely monitor its balance of payments, as rising import costs and export disruptions could pressure foreign exchange reserves if the Gulf crisis persists.

Policy implications

India imports nearly 90 per cent of its crude oil, making it highly sensitive to global price spikes. Policymakers are being urged to diversify energy sources, ensure strategic reserves, and safeguard remittance channels to maintain economic stability amid ongoing Middle East tensions.