THE GEOPOLITICAL CRISIS emanating from West Asia, in the wake of the U.S.-Israel joint attack on Iran that began on February 28, and the subsequent spread of the conflagration, is the fourth global shock for the Indian economy in the last six years.

It all began with the Covid-19 pandemic in 2020, which came as a jolt to an already-slowing domestic economy over the two years preceding the contagion. Even as India and the whole world were slowly recovering from the pandemic blues, the Russia-Ukraine war broke out in February 2022, jeopardising macro stability with rising inflation and high interest rates, and posing challenges to economic growth. The third major disruption came in the form of U.S. President Donald Trump’s Liberation Day tariffs and the subsequent penal tariffs for Russian oil purchases, taking the overall tariffs to a whopping 50% on India, before a trade deal framework was signed between both nations on February 10 this year. The geopolitical crisis emanating from West Asia, in the wake of the U.S.-Israel joint attack on Iran that began on February 28, and the subsequent spread of the conflagration, is the fourth global shock for the Indian economy in the last six years.

The disruption in gas supplies underscored India’s vulnerability to geopolitical tensions, prompting swift measures from the government to secure alternative sources of energy.

In the initial days itself, the Centre secured crude oil supplies over and above the 5.3-million barrel daily requirement by tapping into alternative destinations. Around 70% of the supplies were sourced from outside the Strait of Hormuz, compared with 55% earlier. And as serpentine queues emerged outside LPG outlets despite repeated assurances that there was no shortage of LPG in the country, the government invoked the Essential Services Act for continued supply of LPG cylinders and piped natural gas (PNG) to households, while rationing gas use by industries. A 45-day booking period was imposed for rural consumers. Hoarders and black marketers were dealt with strictly through raids and surprise checks. More than 2,600 raids were conducted (as of March 25), and 450 cylinders seized in Delhi, Karnataka, Maharashtra, Madhya Pradesh, Rajasthan, and Telangana, according to a communiqué by the government. Around 680 FIRs have been registered and 195 people arrested till then.

To protect a battered airline industry, which has been facing the heat of war because of rising fuel costs, longer routes, airspace closures, and weakening demand, the government revoked airfare caps imposed in December on domestic air tickets in the wake of the IndiGo crisis, effective March 23.

Meanwhile, on March 27, Prime Minister Narendra Modi chaired a virtual meeting with chief ministers and lieutenant governors of states “to review preparedness in light of the emerging situation arising out of recent developments in West Asia and its potential impact on India.” He also urged the states to ensure the smooth functioning of supply chains and take strict measures against hoarding and profiteering. The Centre has also set up an informal group of ministers (IGoM), chaired by defence minister Rajnath Singh, to monitor developments arising as a result of the conflict. The group reportedly includes home minister Amit Shah, finance minister Nirmala Sitharaman, and petroleum minister Hardeep Singh Puri, among others. The first meeting of the IGoM was held recently.

Earlier, an inter-ministerial group (IMG) was set up to ensure supply chain resilience and monitor the crisis, ensuring the readiness of India’s exim trade amid the emerging situation.

At the same time, the government also took steps to ease the economic impact of the situation. On March 26, it reduced the excise duty on petrol from ₹13 to ₹3 per litre, and fully exempted diesel (from ₹10 per litre to nil).

Sitharaman has said the excise cut was designed to ensure that oil marketing companies (OMCs) continue to import crude oil without passing on higher costs to consumers. “In view of this, we took this decision to ensure that OMCs do not stop buying crude oil so that there is no shortage of fuel in the country.”

According to Vivek Chaturvedi, chairman, Central Board of Indirect Taxes and Customs, the reduction will result in a revenue loss of about ₹7,000 crore over the next 15 days. Alongside the excise duty cut, the government also increased the export duty on ATF (aviation turbine fuel) to ensure sufficient domestic availability. The special additional excise duty, or windfall tax, on diesel and ATF will be reviewed every fortnight from now on.

Effective April 1, 2026, the government also mandated PSU OMCs to pass on upto 25% hike on ATF price for domestic airlines against an expected 100% hike. Of this, the OMCs have passed on 8.5% hike to airlines.

Meanwhile, amidst all these and other efforts, India has kept the top-level diplomatic channels open. Post the blockage of the Strait of Hormuz, Prime Minister Modi spoke with Iranian President Masoud Pezeshkian on March 13, and conveyed that unhindered transit of goods and energy along with safety and security of Indian nationals were India’s top priorities.

“The safety and security of Indian nationals, along with the need for unhindered transit of goods and energy, remain India’s top priorities. Reiterated India’s commitment to peace and stability and urged for dialogue and diplomacy,” Modi tweeted. The very next day, Iran’s ambassador to India, Mohammad Fathali, confirmed the safe passage for Indian ships via the Strait of Hormuz. Being asked when Indian ships will start plying via Hormuz, Fathali said, “Yes, you can see it in two or three hours. India is a friend.” Since then, the Indian Navy has been escorting vessels bound for India.

As the attacks and counter-attacks intensified and energy infrastructures were targeted, India took a firm stand. The government strongly criticised the rising attacks on energy infrastructure in the Gulf region, warning that the escalating conflict in West Asia could further destabilise global energy markets.

In response to Iran’s retaliatory strikes targeting energy installations across Saudi Arabia, Qatar, the U.A.E., and Kuwait, following Israel’s airstrike on the South Pars gas field, an official statement of the Ministry of External Affairs (MEA) said, “India had previously called for the avoidance of targeting civilian infrastructure, including energy infrastructure, across the region… Recent attacks against energy installations in different locations across the region are therefore deeply disturbing and only serve to further destabilise an already uncertain energy scenario for the whole world. Such attacks are unacceptable and need to cease.”

Amid political upheavals on the long queues at the LPG outlets, PM Modi said India was leaving no stone unturned to deal with the crisis. “No nation in the world is untouched by the challenges that have come up on the global front. India is also not leaving any stone unturned to deal with this challenge.”

Referring to the Russia-Ukraine war, the Prime Minister said India has witnessed how such situations affect global markets and citizens. “But the Indian government is trying all measures to ensure that war conditions do not impact the citizens adversely.”

He also did not mince words in outlining the impact of the continued disruption due to the crisis and highlighted the efforts being planned by the government. In his address to the Lok Sabha on March 23, Modi said, “Energy is the backbone of the modern economy and West Asia is a major source for global energy needs, making the current crisis a challenge for economies worldwide. The government is working with a comprehensive short-term, medium-term, and long-term strategy, supported by strong economic fundamentals, sector-specific stakeholder consultations, and a dedicated inter-ministerial group that meets daily to assess and resolve every difficulty in India’s import-export chain.”

The government’s focus has been on protecting ordinary families from hardship, he said, noting measures such as prioritising domestic use of LPG and boosting its domestic production. “Continuous work has been done to ensure that the supply of petrol and diesel continues smoothly across the entire country,” he added.

To put things in context, domestic refinery production has been ramped up by 40%, bringing daily LPG output to 50 TMT (thousand metric tonnes), against a total daily requirement of around 80 TMT. “The net daily import requirement has consequently come down to only 30 TMT — meaning India is now producing much more than it needs to import. Over and above domestic production, 800 TMT of assured inbound LPG cargoes are already secured and en route from the U.S., Russia, Australia, and other countries,” the government said.

On petrol and diesel, unlike other countries that are increasing prices, implementing rationing and odd-even vehicle restrictions, and forced station closures, the government has categorically said, “India does not feel the need for any such measure.”

“Nearly two months of steady supply is available for every Indian citizen regardless of what happens globally. The next two months of crude procurement has also been secured. India is completely secure for the next many months and the quantity in strategic cavern storage becomes secondary in such a supply situation,” the government said in a release.

“India has 74 days of total reserve capacity and actual stock cover is around 60 days right now (including crude stocks, products stocks and the dedicated strategic storage in caverns)… Therefore, any representation that India’s reserves are depleted or insufficient should be dismissed with the disdain it deserves.”

Industry leaders have lauded the government’s efforts, highlighting how timely policy support and reforms have helped the economy remain resilient despite global disruptions.

“Indian industry has consistently demonstrated strong resilience in the face of global uncertainties, including geopolitical tensions and supply chain disruptions. The continued robust performance of the economy reflects the strength of its policy framework and the impact of sustained reforms undertaken by the government to enhance competitiveness, improve ease of doing business, and strengthen the manufacturing ecosystem,” says R. Mukundan, president-designate, CII, and MD and CEO, Tata Chemicals.

“The response from the government and the industry has been quick, calibrated, and continuous as we move along. The government has moved decisively on several fronts — crude diversification, LPG production maximisation, export facilitation and currency stabilisation,” adds Chandrajit Banerjee, director general, CII. “India entered this period from a position of strength, supported by sustained reforms and the government’s emphasis on Atmanirbharta, which have significantly enhanced the economy’s self-resilience.”

Crisis control

GIVEN THE management of the crisis so far — no LPG, petrol, or diesel shortage unlike other neighbouring nations — at least the common citizen remains insulated, even though industries such as auto components, ceramics, and textiles are suffering due to gas shortage rationing. The Prime Minister has acknowledged that large quantities of crude oil, gas, fertilisers, and other essentials come to India through the Strait of Hormuz, and shipping through the Strait has become highly challenging since the war.

On March 27, in a major relief to industries, the government increased the allocation of commercial LPG, to 70% of the pre-crisis levels, from the earlier 50%. The 20% additional allocation will prioritise labour-intensive and core sectors such as steel, automobiles, textiles, chemicals, and plastics — particularly units where LPG use cannot be substituted by natural gas due to process-specific requirements.

Auto component makers in clusters such as Pune, Chennai, and Gurugram have been grappling with gas shortages for forging and casting, alongside surging input costs. The ₹53,000-crore ceramic industry, primarily in western India, fears a 6-7% hit to export revenues, as fuel shortages and logistics disruptions bite.

Textile clusters — Surat, Tirupur, Mumbai, Coimbatore, Bhiwandi and Panipat — meanwhile, are also under pressure, facing rising raw material costs, stalled export orders and production cuts. The Gulf remains a key market, with the U.A.E. as India’s third-largest and Saudi Arabia the eighth-largest export destination for ready-made garments.

Pharma, too, is facing the heat. “Supply chain disruptions and escalating freight charges are likely to impact India’s pharmaceutical exports to the Middle East, and a complete disruption could cause losses worth ₹2,500 crore to ₹5,000 crore,” says Namit Joshi, chairman, Pharmaceutical Export Promotion Council of India (Pharmexcil). “Medical device input costs have gone up by nearly 50% for critical plastics and over 20% for packaging,” adds Rajiv Nath, forum coordinator, Association of Indian Medical Device Industry (AiMeD).

The impact is also creeping into agriculture — a sector often insulated but now increasingly exposed. An estimated 25-35% of globally traded ammonia and urea moves through the Strait of Hormuz. India also imports over 60% of DAP (di-ammonium phosphate), largely from Oman, Qatar, Saudi Arabia, and the U.A.E.

“Among producers of ammonia-based products and gas-dependent chemicals, a significant number of units have curtailed output by 30-50%, with some having suspended operations temporarily due to the complete non-availability of feedstock at viable prices… In the specialty chemicals and agrochemical intermediates segment, curtailments of 20-40% are being reported, primarily driven by the unavailability of specific imported raw materials and unviable production economics at current input costs,” Ramya Bharathram, president, Indian Chemical Council, and MD and CFO, Thirumalai Chemicals Ltd, tells Fortune India.

“Over the longer term, if LNG supply constraints persist, India risks a structural deficit in ammonia-based products, deepening import dependence at a time when global supply chains are themselves under stress. This underscores the urgency of accelerating investments in green ammonia using renewable hydrogen, domestic natural gas exploration, investing in CBG (compressed bio gas) and coal gasification as an interim bridge. The current crisis must become the catalyst for building genuine feedstock self-reliance,” she adds.

For now, the government maintains there is no immediate shortage for the kharif season, with stocks up 20% year-on-year and 70% gas supply secured for fertiliser plants. Imports from Russia and Morocco have also accelerated to mitigate the crisis.

“The government is actively engaging global suppliers and monitoring Gulf shipping routes to ensure the safe passage of essential goods like oil, gas, and fertilisers… I am fully confident that through the joint efforts of the government and the industry, we will be able to face these circumstances effectively,” PM Modi said on March 23.

“Supplies are comfortable for now… If disruption persists into kharif, landed costs, sourcing risk and subsidy pressure will rise, with any near-term inventory gains likely offset by higher replenishment costs — favouring players with stronger sourcing and inventory positions,” says Niti Agarwal, analyst with merchant banking firm DAM Capital Advisors Ltd.

It is evidently clear that multiple measures, ranging from diplomatic interventions, policy responses, and administrative controls are being deployed by the Modi government to address the impact of the West Asia crisis. How it unfolds remains the key metric to watch out for even as multiple efforts are currently on to assuage the situation.

(With inputs from P.B. Jayakumar and Joe C. Mathew)