The Commerce Department is keeping a close watch on the developments in West Asia following the direct confrontation between Israel and Iran and is in continuous dialogue with the industry as India’s bilateral trade has already taken a hit with countries in the region such as Israel, Iran, Jordan, Lebanon and Yemen so far, sources have said.
Any escalation of the situation between the two countries could impact entire West Asia impacting Indian exports to the region as well as Africa, an official said. “Till Iran got directly involved in the Israel-Palestine conflict, Indian traders managed their business and avoided the Houthi’s attacks on the Red Sea by taking the longer alternative route of the Cape of Good Hope to Europe. But now if the situation escalates into a full-blown war, it will not be confined to just Iran and Israel,” the official told businessline.
As West Asia is a big driver of demand and is also the route for exporting to Africa, India’s exports to both regions could take a beating, the official said. He added that so far, barring a few items such as garments and apparel, other exports are mostly steady, but things could change as the ongoing war seems to be one that would be long drawn.
“Because of the direct conflict between Israel and Iran, sentiments in the Middle East have been definitely impacted. So I don’t foresee much growth in the trade with the Middle East countries. If prices of oil go up, it may boost value but I don’t see much volume-wise growth in these markets,” said Ajay Sahai, Director General of the Federation of Indian Export Organisations.
In April-August 2024, India’s exports to West Asia (barring the GCC countries) dropped by 28.57 per cent to $3.53 billion. Exports to Israel from India, which had already declined 13.6 per cent in FY24, fell further by 58.67 per cent in the first five months of the current fiscal to $791.8 million.
Exports to Iraq, which posted a 24.5 per cent growth in FY24, declined in April-August 2024 by 4.8 per cent to $1.38 billion. Exports to Jordan declined 52 per cent in the first five months of the fiscal to $280.5 million, while exports to Lebanon fell 10.56 per cent to $137.87 million.
Imports from West Asia (barring GCC) into India in April-August 2024 rose marginally by 3.4 per cent to $13.54 billion. However, imports from Israel took a beating and declined 42.17 per cent to $584.82 million.
“Since the West Asia conflict began last year, transit times to certain ports have increased, which has impacted our ability to supply certain product categories to certain countries,” pointed out Fauzan Alavi, Director, Allanasons, an exporter of meat and food items.
He said not only had freight costs increased, but there were now very limited options available for shipping to the affected ports which has led to schedule unreliability.
If the escalation in the crisis negatively impacts shipping to African countries, Indian exports could take a further hit as exports to the continent in FY24 already declined 11.45 per cent to $45.33 billion.
“The Commerce Department is also in consultation with the Shipping Ministry which is looking at how the situation can be eased for traders. They are holding meetings with CONCOR to see if we can look into internal movement or relocation of containers. They are proactively engaged,” Sahai said.