Kolkata: The US-Iran war has triggered supply shocks across the world and also the Indian economy. From shrinkage of export markets to inflationary pressures,
from dramatic decline in the value of the rupee to sectors directly dependent on natural gas supplies, the conflict has caused a lot of misery. Now analysts are saying the truce becoming durable and the possibility of the Strait of Hormuz reopening can translate into major gains for different sectors of the Indian economy. However, the extent of the relief will ultimately depend on the durability of the ceasefire. Let’s have a look at which sectors can gain and how.
Energy prices
Primarily, the immediate benefit will be to those who are buying crude. The benchmark Brent crude prices plunged by 16% on Wednesday — from a level of about $111 a barrel to under $95 a barrel. All nations which are critically dependent on imported oil such as India — it imports close to 90% of the crude requirements — will immediately benefit. As on April 7, the average price of the crude oil that India buys stood at a staggering $135.63 a barrel. This has not only stoked inflationary pressures in India but also has impacted the revenue stream of the government after it cut excise by Rs 10/litre to prevent any rise in the retail prices of petrol and diesel to prevent wider inflationary pressure on the economy.
Wider economy
If the crude prices keep lowering, it will signal an improvement in wider macro-economic indicators for the economy. The fortunes of the oil and gas industry will look up, as will the fortunes of fertilisers and petrochemicals. The price of the key raw material can come down, lowering operational costs. Direct benefits will accrue to the Indian rupee which suffered a dramatic collapse against the US dollar as the demand for the greenback went up as crude oil and natural gas prices went up. The current account deficit went up as imports became far more expensive.
Students, migrants and remittances
This is a very big sector in terms of numbers. About 90 lakh Indians live in West Asia and a large number of students and professionals , and hundreds of thousands of students are currently pursuing their studies there. A significant number of Indians are present in the UAE, Saudi Arabia, Kuwait, Qatar and Oman. If the situation in the Gulf area becomes normal, it will reduce the uncertainty facing them. The cost of living will also come down in West Asia and remittances will also become normal`. India leads the world in remittances and the money flowing in from the Gulf nations constitute about 38% of India’s total inflow of $135 billion.
Tourism and trade
The war in West Asia also impacted the movement of tourists and labour, especailly with the theatre of conflict expanding in othyer countries such as Saudi Arabia, Kuwait and Dubai. Traveling to the Gulf nations not only became hazardous but also impossible with hundreds of flights being cancelled through the transit points such as Dubai and Abu Dhabi. The situation could normalise in these regions quickly if the peace becomes durable. In fact, travelling to Europe was also becmong extremely expensive with flights being cancelled and taking a detour through other regions. West Asia accounts for about 47% of India’s total international travel volume and in 2024 alone 1.46 million trips were undertaken to this region.
Relief to Indian companies
Several Indian companies which are active in the infrastructure sector are active in the Gulf region. These companies are facing big uncertainty as the war kept on escalating. The ceasefire can being big relief to these. The most prominent among the list of Indian companies active in this area is L&T. International business accounts for about 30–35% of L&T’s projects and a large share is in the UAE, Saudi Arabia, Qatar and Oman, where it works as an EPC (Engineering, Procurement and Construction) contractor. Other companies which are active in this region are Afcons Infrastructure of the Shapoorji Pallonji group, KEC International of the RPG Group, Kalpataru Projects International, Tata Projects, GMR group, Voltas etc.
