Middle East Conflict Poses Global Threat to India's Export Economy
Commerce Secretary Rajesh Agrawal issued a stark warning on Saturday, stating that a prolonged conflict in the Middle East could severely impact India's exports not only to the region but also to other global markets. He emphasized that disrupted supply chains would ripple outward, creating broader economic challenges.
Immediate Trade Impacts and Supply Chain Disruptions
Speaking on the sidelines of the 'Chintan Shivir – Scaling Up Pharma Exports' event in Hyderabad, Agrawal revealed that the government has already observed significant effects on both imports and exports over the past month due to the Middle East crisis. Energy imports and regional trade flows are particularly under pressure.
"The Middle East is a crucial market for India, accounting for approximately 12-13% of our total exports. This direct impact is already evident. If the conflict persists, our exports to other parts of the world may also suffer as value chains become entangled," Agrawal told reporters, as per news agency PTI.
He indicated that the exact toll on India's trade would become clearer in the coming weeks, but both exports and imports are likely to experience declines. "It will not only be a one-way traffic, with exports going down, but imports may also see some downfall," he added.
Long-Term Uncertainties and Government Measures
Agrawal cautioned that even if the war concludes soon, disruptions could linger for months or years, depending on the extent of damage to supply chains and infrastructure. "At this juncture, it is very difficult to take a long-term view," he stated.
The Centre is actively working to minimize supply chain disruptions, though some trade numbers may soften in the near term. All government arms are prioritizing limited LPG supply and exploring diversification of imports and alternative sourcing to ease the situation.
Pharmaceutical Sector Under Pressure and Call for Self-Reliance
The pharmaceutical sector is already feeling the strain, with key intermediates and solvents facing availability issues due to affected supply chains. Agrawal highlighted this as a priority area for government intervention.
At the Hyderabad event, he urged the industry to leverage current geopolitical uncertainties to reduce dependence on critical imported inputs. He stressed the importance of achieving 80-90% or higher domestic production for pharmaceutical requirements, particularly in APIs, bulk drugs, and intermediates.
Agrawal emphasized insulating import supply chains in a fragmented world and called for a strategic repositioning of India as a global hub for quality, affordable pharmaceuticals. He encouraged a shift from volume-driven to value-driven models, focusing on innovation and new patents while maintaining strengths in generics.
Resilient Export Performance Amid Challenges
Despite these challenges, Agrawal noted that India's exports are expected to remain on a positive trajectory. Pharmaceutical exports stood at $30.47 billion in 2024-25, marking a 9.4% increase over the previous year. From April to February 2025-26, pharma exports reached $28.29 billion, growing over 5% compared to the same period last year.
India remains the third-largest producer of pharmaceuticals globally by volume and 14th by value, underscoring the sector's critical role and the need to shield it from external shocks.
