Rising West Asia Tensions Reshaping India's Regional Trade Landscape

India's Trade with West Asia Faces Further Disruptions

Overview

India's trade engagement with West Asia has undergone significant changes over the past decade, with geopolitical tensions and recurring conflict reducing commercial flows with key regional partners. The recent escalation of hostilities between Israel and Iran is expected to deepen these disruptions, weighing further on trade routes and costs.

Trade Decline with Iran

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India's trade with Iran has declined sharply, from $26.5 billion in FY13 to $2.5 billion in FY24. This represents a decline of over 91% in bilateral trade. The decline is attributed to US sanctions targeting Iranian oil exports, which have curtailed energy shipments to India.

Stable Trade with Israel

In contrast, India's trade with Israel has remained relatively stable, with exports growing 21% over the same period. However, the composition of imports has shifted toward defence and high-technology sectors. India's imports of arms and ammunition from Israel have surged nearly 100-fold, rising from $1 million in FY13 to $104 million in FY24.

Regional Instability and Global Implications

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Broader regional instability poses risks to global shipping, with disruption in the Red Sea corridor, a critical route linking Asia and Europe, expected to push freight and insurance costs elevated. Higher logistics costs could dampen India's exports to Western markets and raise import bills, particularly for energy and intermediate goods.

Key Statistics

• 70%: Share of Israel and Iran in India's trade with West Asia (excluding GCC economies) a decade ago
• 20%: Combined share of Israel and Iran in India's trade with West Asia in FY24
• $2.5 billion: India's trade with Iran in FY24
• $26.5 billion: India's trade with Iran in FY13
• 21%: Growth in India's exports to Israel over the same period
• 15%: Decline in India's imports from Israel over the same period
• 100-fold: Surge in India's imports of arms and ammunition from Israel
• $104 million: India's imports of arms and ammunition from Israel in FY24
• $1 million: India's imports of arms and ammunition from Israel in FY13
• $31.8 million: India's imports of aircraft, spacecraft, and related parts in FY13
• $193 million: India's imports of aircraft, spacecraft, and related parts in FY24