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India Inc must urgently build inventory buffers and diversify sourcing to navigate mounting supply chain risks triggered by the West Asia conflict, Anant Goenka, Vice Chairman of RPG Group and President of FICCI, told CNBC-TV18.
The warning comes as the ripple effects of the Gulf conflict spread beyond the region, which remains a critical hub for crude oil, LNG, LPG, fertilisers and petrochemicals. Disruptions are already pushing up fertiliser prices, tightening supply chains and raising freight costs, with implications for sectors ranging from manufacturing to healthcare.
Goenka said the impact is being felt across industries, including fertilisers, chemical intermediaries, paints, pharmaceuticals and automobiles, largely through indirect channels.
“The impact is coming through second- and third-order effects,” he said, explaining that even businesses not directly linked to crude or gas are being hit through inputs such as packaging and steel. “Currently, we are finding that many businesses are operating hand-to-mouth.”
He cautioned that the situation could worsen quickly if the conflict drags on, with risks of production disruptions emerging in the near term. “Possibly in a month’s time, or three to four weeks, we may see factory stoppages,” he said, underlining the urgency of ensuring business continuity and de-risking supply chains, especially on the raw material side.
Against this backdrop, Goenka said companies need to take immediate steps to strengthen resilience. “We need to increase inventory buffers for critical inputs… and diversify sourcing if we are dependent on a single geography,” he said, adding that collective procurement could also improve buying power in a tight market.
Beyond supply chains, he flagged financial and energy security as key priorities for India Inc. Companies should avoid non-essential capital expenditure, secure additional funding lines and hedge currency risks, while also exploring measures such as multi-fuel usage, renewable energy adoption and efficiency improvements to manage rising energy costs.
The uncertainty has also forced businesses to rethink planning cycles. “We will have to operate on a here-and-now, month-on-month basis,” Goenka said, noting that budgets prepared earlier this year have become largely irrelevant in the current environment.
The stress is particularly acute for smaller firms, with early signs of pressure already visible. Goenka said there are indications of job losses among gig economy workers and in sectors such as restaurants, as smaller companies struggle to cope with margin pressures.
Also Read | The food price shock may be worse than soaring energy prices
While acknowledging steps taken by the government — including the creation of empowered groups, tax relief on fuels and continued export incentives — he said more targeted support may be needed if the disruption persists. Measures such as expanding export credit insurance, fast-tracking import approvals and strengthening credit guarantee schemes could help, especially for MSMEs.
“Clarity on force majeure is particularly important,” Goenka said, adding that such provisions would protect smaller firms from penalties on delayed deliveries caused by the conflict. He reiterated that MSMEs should be the primary focus of any immediate relief efforts, as they remain the most vulnerable to prolonged supply shocks.
India has already moved to manage the fallout by regulating gas supply to priority sectors, tightening LPG distribution and pushing refiners to maximise domestic output, while also diversifying crude and gas sourcing. However, with no clear resolution in sight, industry leaders warn that building buffers and reducing dependence on single supply sources will be critical to weathering the storm.
The warning comes as the ripple effects of the Gulf conflict spread beyond the region, which remains a critical hub for crude oil, LNG, LPG, fertilisers and petrochemicals. Disruptions are already pushing up fertiliser prices, tightening supply chains and raising freight costs, with implications for sectors ranging from manufacturing to healthcare.
Goenka said the impact is being felt across industries, including fertilisers, chemical intermediaries, paints, pharmaceuticals and automobiles, largely through indirect channels.
“The impact is coming through second- and third-order effects,” he said, explaining that even businesses not directly linked to crude or gas are being hit through inputs such as packaging and steel. “Currently, we are finding that many businesses are operating hand-to-mouth.”
He cautioned that the situation could worsen quickly if the conflict drags on, with risks of production disruptions emerging in the near term. “Possibly in a month’s time, or three to four weeks, we may see factory stoppages,” he said, underlining the urgency of ensuring business continuity and de-risking supply chains, especially on the raw material side.
Against this backdrop, Goenka said companies need to take immediate steps to strengthen resilience. “We need to increase inventory buffers for critical inputs… and diversify sourcing if we are dependent on a single geography,” he said, adding that collective procurement could also improve buying power in a tight market.
Beyond supply chains, he flagged financial and energy security as key priorities for India Inc. Companies should avoid non-essential capital expenditure, secure additional funding lines and hedge currency risks, while also exploring measures such as multi-fuel usage, renewable energy adoption and efficiency improvements to manage rising energy costs.
The uncertainty has also forced businesses to rethink planning cycles. “We will have to operate on a here-and-now, month-on-month basis,” Goenka said, noting that budgets prepared earlier this year have become largely irrelevant in the current environment.
The stress is particularly acute for smaller firms, with early signs of pressure already visible. Goenka said there are indications of job losses among gig economy workers and in sectors such as restaurants, as smaller companies struggle to cope with margin pressures.
Also Read | The food price shock may be worse than soaring energy prices
While acknowledging steps taken by the government — including the creation of empowered groups, tax relief on fuels and continued export incentives — he said more targeted support may be needed if the disruption persists. Measures such as expanding export credit insurance, fast-tracking import approvals and strengthening credit guarantee schemes could help, especially for MSMEs.
“Clarity on force majeure is particularly important,” Goenka said, adding that such provisions would protect smaller firms from penalties on delayed deliveries caused by the conflict. He reiterated that MSMEs should be the primary focus of any immediate relief efforts, as they remain the most vulnerable to prolonged supply shocks.
India has already moved to manage the fallout by regulating gas supply to priority sectors, tightening LPG distribution and pushing refiners to maximise domestic output, while also diversifying crude and gas sourcing. However, with no clear resolution in sight, industry leaders warn that building buffers and reducing dependence on single supply sources will be critical to weathering the storm.
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