India Introduces Comprehensive Support Measures for Exporters Impacted by Gulf Conflict
The Indian government has rolled out a series of targeted measures to bolster exporters who are grappling with significant disruptions stemming from the ongoing conflict in the Gulf region. Key export sectors, including gems and jewellery, rice, and pharmaceuticals, are under considerable pressure as logistical and financial hurdles mount. This initiative was highlighted during an inter-ministerial briefing, where officials outlined the multifaceted challenges and the government's response strategy.
Commerce Ministry Collaborates with Insurers and Banks to Mitigate Risks
At the briefing, Director General of Foreign Trade Lav Aggarwal emphasized that the commerce ministry is actively engaging with insurers and banks to address critical issues such as escalating war-risk insurance premiums and concerns over trade finance. This collaborative effort aims to provide a safety net for exporters navigating the turbulent trade environment caused by the Gulf conflict.
Substantial Trade Volumes at Stake in the Gulf Region
The economic stakes are high, with India's exports to the Gulf region—comprising the UAE, Saudi Arabia, Oman, Bahrain, Qatar, and Kuwait—valued at approximately $57 billion in the 2024-25 fiscal year. Total bilateral trade during this period reached an impressive $178 billion, underscoring the region's importance as a vital trade partner for India.
Logistical and Financial Challenges Facing Exporters
Exporters are confronting a range of obstacles, including heightened freight costs, vessel rerouting, and disrupted payment channels, all of which are adversely affecting shipments. Sectors bearing the brunt of these disruptions include petroleum products, chemicals, engineering goods, rice, pharmaceuticals, and gems and jewellery. The Gulf region remains the largest agricultural export destination for items such as basmati rice, marine products, and fresh produce, but rising air and sea freight costs are particularly impacting the shipment of perishable goods.
Specific Sectoral Impacts and Vulnerabilities
Gems and Jewellery:For the gems and jewellery sector, the Gulf Cooperation Council serves as both a crucial export market and a key sourcing hub. Exports of gold jewellery are under significant stress, while the sourcing of gold bars and rough diamonds has also been disrupted, creating a dual challenge for this industry.
Engineering Goods:Engineering exports are facing additional pressure due to war-risk surcharges imposed by shipping lines. Furthermore, disruptions in LPG and PNG supplies are affecting foundry, forging, and machining units, compounding the sector's difficulties.
Pharmaceuticals and MSMEs:Pharmaceutical supply chains are under strain due to disruptions in critical inputs, while Micro, Small, and Medium Enterprises (MSMEs) are grappling with shortages of raw materials, threatening their operational continuity.
Government's Coordinated Response and Monitoring Efforts
To manage this complex situation, the commerce ministry established an inter-ministerial group on March 2, tasked with assessing and coordinating the trade impact of the West Asia conflict. This group has already conducted 20 meetings, with a dedicated sub-group focusing on facilitating the movement of perishable cargo. According to Aggarwal, the group continues to monitor the evolving situation closely, ensuring effective inter-ministerial convergence to support and stabilize trade flows amidst the ongoing challenges.
