Middle East Conflict Triggers Economic Ripples in Surat's Key Industries
The Southern Gujarat Chamber of Commerce and Industry (SGCCI) has issued a stark warning about the economic fallout from escalating tensions in Western Asia, particularly affecting Surat and south Gujarat. Officials stated on Sunday that the conflict involving the US, Israel, and Iran is creating global uncertainty that is beginning to impact local industries.
Diamond Industry Faces Supply Chain Disruptions and Rising Costs
SGCCI President Nikhil Madrasi highlighted that Surat's diamond industry, already experiencing a slowdown, could face further deterioration due to the conflict. Israel serves as a crucial global hub for diamond trading, and instability there is directly affecting the availability of rough diamonds to Surat's manufacturing units.
Madrasi elaborated on multiple challenges:
- Supply chain disruptions: With the US involved in the conflict, demand for luxury goods in the American market may weaken, impacting exports of diamonds and jewellery.
- Increased production costs: Restrictions on Russian rough diamonds, combined with rising freight and insurance costs due to Red Sea shipping route disruptions, have escalated expenses for diamond manufacturers.
- Employment concerns: Madrasi warned that if the situation persists, employment in the gem and jewellery sector could be adversely affected.
- Currency volatility: Global uncertainty and fluctuations in the dollar-rupee exchange rate pose additional challenges for exporters.
Textile Sector Vulnerable to Rising Petroleum Prices
SGCCI Vice-President Ashok Jirawala expressed concerns about Surat's textile industry, which is heavily dependent on polyester and man-made fibres (MMF) derived from petroleum products. Escalating tensions in the Middle East could drive crude oil prices higher, potentially leading to a 15–20% increase in yarn and raw material costs in the short term.
Jirawala detailed further complications:
- Trading gateway disruptions: Dubai and other Gulf countries act as major trading gateways for Surat's textile exports. The current geopolitical situation has already caused shipment delays.
- Payment security risks: Concerns have been raised about payment security from overseas buyers amid the instability.
The SGCCI's assessment underscores how regional conflicts can have tangible economic consequences for industrial hubs like Surat, affecting both traditional sectors like diamonds and modern industries like textiles.
