With nearly 88% of its crude oil imported—and almost half coming from West Asia—India remains highly exposed to supply disruptions and global price volatility.
India’s deep economic linkages with West Asia are beginning to show signs of strain as ongoing geopolitical tensions in the region translate into rising costs, trade imbalances and sector-specific risks. According to a joint report by Rubix Data Sciences and Vayana TradeXchange, the impact is already visible across energy, trade and supply chains, with the potential for wider economic consequences if the situation remains unresolved.
At the heart of the concern is India’s heavy dependence on energy imports. The country imports nearly 88% of its crude oil needs, with close to half sourced from West Asia. This makes India particularly vulnerable to any disruption in supply or spikes in oil prices. The report highlights that even a $10 per barrel increase in crude prices can inflate India’s annual import bill by USD 13–14 billion, putting pressure on inflation and widening the current account deficit.
Trade exposure further amplifies this vulnerability. India’s total merchandise trade with West Asia stood at $ 220 billion in FY2025, with imports significantly outweighing exports. This structural trade deficit, largely driven by energy dependence, is now being compounded by rising logistics costs and uncertainty in shipping routes.
The impact is not uniform across sectors. The report identifies critical industries such as crude oil, LNG, LPG, fertilisers and petrochemicals as being at high to very high risk, given their reliance on imports and key transit routes like the Strait of Hormuz. Any disruption here can quickly ripple through the broader economy.
On the export side, early signs of stress are emerging in agriculture and food segments. Rice exports, in particular, are flagged as highly sensitive to freight cost fluctuations and demand shifts in Gulf markets. Frozen bovine meat exports face moderate risk, while other export-oriented sectors such as gems and jewellery and engineering goods could see demand soften if regional economic activity slows down.
Beyond direct trade, several industries are feeling indirect pressure. Aviation, chemicals, plastics and logistics are grappling with rising input costs and volatile freight rates, forcing companies to adjust supply chains and manage tighter margins.
Indian companies with operations in West Asia are also navigating a more complex environment. Sectors like infrastructure, energy and logistics are witnessing higher insurance costs, project delays and working capital challenges. While operations remain stable for now, the report points to early signs of stress in execution and payment cycles.
Remittances, a crucial pillar of India’s external inflows, could also face uncertainty. In FY2025, India received a record $135.4 billion in remittances, with nearly 38% coming from Gulf Cooperation Council countries. Any prolonged slowdown in regional economies, particularly in sectors employing large numbers of Indian workers, could impact these inflows.
Investment flows, though steady so far, remain another area to watch. Cumulative foreign direct investment from West Asia into India has reached $ 31.7 billion, led by sovereign funds from the UAE and Saudi Arabia. However, continued uncertainty could delay fresh investments and slow capital deployment.
What stands out in the report is that the risks are not always immediate but tend to build gradually. Rising energy prices, shifting trade patterns and evolving payment cycles are already creating pressure points across the economy. If tensions persist, these effects could become more widespread, affecting both growth and stability.
For now, India’s strong economic ties with West Asia remain intact. But as the situation unfolds, the ability to manage volatility in energy, trade and capital flows will be critical in determining how well the economy navigates this phase of uncertainty.