The ongoing war in West Asia is a risk to India’s trade and macroeconomic stability, as the conflict can widen the current account deficit of the country and exacerbate the weakening of the domestic currency, government think tank Niti Aayog said in a report.
In its quarterly Trade Watch Report for the third quarter of FY26, the Aayog highlighted the significance of the Gulf region for the Indian economy.
The Gulf region accounts for about 12 percent of India’s total exports and imports, with the UAE (exports: 7.5 percent; imports: 6.1 percent) and Saudi Arabia (exports: 2.36 percent; imports: about 3.9 percent) as key partners, the report said.
“Crucially, the UAE acts as a major re-export hub that connects Indian trade to markets across West Asia, Africa, and Europe. Energy remains a key component, with about 33 percent of mineral fuel imports sourced from the Middle East,” it added.
On the other hand, India is also dependent on the region for importing about 36 percent of its fertiliser needs and 32 percent of precious stones and metals.
Not only this, the war has also affected free trade talks between India and the Gulf Cooperation Council (GCC), “reflecting the link between regional conditions and trade diplomacy.”
For India to maintain its sustainable growth, it would need to remain steady while also adapting to changes, said Suman Bery, Vice Chairman, Niti Aayog.
Industrial linkages are also present through organic chemicals (12.7 percent) and plastics (11.3 percent).
“This highlights the importance of the region in supporting trade flows, including import supply chains, export realisation, and trade financing channels. Connectivity with West Asia also supports India’s access to Central Asia through established trade corridors and transit routes. Overall, the region plays a key role in supporting India’s trade flows, supply chains, and market access.”
In the third quarter, India’s merchandise exports grew by 1.6 percent, while imports increased by 7.9 percent.
