Ripples from West Asian Conflict Impact Punjab's Manufacturing Sector

Disruptions in Punjab's Industrial Belt Weigh on Production Schedules

Manufacturing activity in Punjab's industrial belt has been severely impacted by disruptions resulting from ongoing geopolitical tensions and shipping uncertainties through March and beyond.

The situation has added to existing pressures from trade fractions, higher input costs, and supply chain delays, further straining manufacturing activity in export-oriented units. Ludhiana, Amritsar, and Jalandhar, which form the core of Punjab's manufacturing economy, have been particularly affected.

Ludhiana dominates knitwear, bicycles, and auto components, while Jalandhar is a hub for hand tools and sports goods. Amritsar, on the other hand, is linked to textiles and agro-based exports. The disruptions have resulted in reduced production schedules, with workers facing shorter shifts and manufacturers struggling to find enough gas to keep production running.

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The pressures seen at Eastman Cast and Forge Ltd. were visible across sectors in Punjab, from bicycles to garments and food exports. Manufacturers reported similar disruptions, though the intensity varied depending on their exposure to global markets and logistics.

At Ludhiana's Hero Ecotech Ltd., a bicycle manufacturing unit, production was hit by a combination of rising input costs and fuel shortages. The unit faced a near-complete shortage of industrial gas through much of March, forcing it to switch to diesel and other higher-cost fuel alternatives to maintain operations.

"Our costs have doubled because of the efficiency difference," said Gaurav Munjal, managing director of Hero Ecotech Ltd. Despite the increase in production costs, manufacturers have been unable to pass on higher prices to customers, with cost pressure largely unabsorbed in export markets and only partially passed through in the domestic market.

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Labour shortages and erratic electricity supply in Ludhiana have added to pressures in industries across the city. Many factory owners are absorbing costs for now, but if the war extends for two months or so, they might have to pass on the price rise.

Labour shortages have compounded the problem, with many workers who had left for Holi in late February or early March delaying their return, uncertain about the situation as the conflict escalated and work slowed. Federation of Indian Export Organisations (FIEO) President S C Ralhan estimated that around 5-7 percent of workers did not return due to LPG-related disruptions owing to the crisis in West Asia.

The impact was more visible in labour-intensive sectors such as garments. At Eveline International, a Ludhiana-based knitwear manufacturer and exporter, production and orders have both come under pressure in recent months.

"The last 8-9 months have been very difficult," said Deepak Dumra, director at Eveline International, pointing to prolonged uncertainty in key export markets such as the United States. Orders are definitely on hold because there is great uncertainty... no one knows what the final duty will be."

India's merchandise exports to the Gulf Cooperation Council (GCC) countries stand at around $100-120 billion annually, with the United Arab Emirates accounting for the largest share. At DRRK Foods Pvt. Ltd., an Amritsar-based basmati rice exporter with over 60 percent of its shipments bound for the Gulf, the impact was felt almost instantly as shipments slowed and ports began to clog up.

"A lot of the stocks are still lying at ports because shipping companies are not able to move them. It's not that buyers don't want the goods, it's that they're not able to get them," said Viren Marwaha, assistant director, sales and marketing at DRRK Foods Pvt. Ltd.

For now, manufacturers across key cities of Punjab say that even if the war ends completely, input costs, from steel to fuel, are expected to remain elevated for the next two to three months, with little immediate relief in sight. Manufacturers may take a few months to recoup losses from March alone.

"Prices won't come down immediately. We have to deal with these new levels," said Sanjoo Tandon of Eastman Cast and Forge Ltd. Some drew parallels with the pandemic period, when global trade briefly came to a standstill before demand rebounded sharply.

"We saw Covid... we thought the world will end, but people moved on," Tandon said, adding that uncertainty is constant in business but recoveries tend to follow disruptions.