West Asia conflict disrupts India trade flows, hurts exports and imports: Crisil

Conflict in West Asia dealt a double blow to India’s trade in March, weighing on both exports and imports, as shipments to key regional partners fell sharply and supply disruptions hit crucial imports such as crude oil, gems, and fertilisers. 

The country's goods exports contracted 7.4% year-on-year to $38.9 billion in March, compared with average growth of 0.3% in the previous three months ended February. The decline was partly attributed to a high base effect caused by frontloading of shipments last year ahead of anticipated US tariff increases. 

The impact of the West Asia conflict was particularly visible in gems and jewellery exports, which plunged 29.3%. The UAE has recently overtaken the US as India’s top destination for gems and jewellery exports. 

Core exports, excluding volatile components, also fell 7.5%, indicating broad-based pressure on outbound trade. 

Petroleum exports

Petroleum exports remained resilient, rising 5.7% year-on-year. Analysts said this was supported by higher crude prices, with Brent averaging $95.6 per barrel in March compared with $70.7 a year earlier and $68.0 in February, as well as a likely diversion of fuel shipments to other Asian markets. 

India’s exports to Singapore, one of its largest petroleum export destinations after the Netherlands and UAE, surged 158.6% in March after months of contraction. Exports to Malaysia also jumped 84.5%. 

The contraction in oil imports, coupled with stronger petroleum exports, helped narrow India’s oil trade deficit to $7 billion in March from $14.1 billion a year earlier and $9.5 billion in February. 

Exports to key West Asian markets weakened sharply, with shipments to Saudi Arabia falling 45.7% and exports to the UAE declining 61.9% year-on-year.

Imports at a glance

Imports were also hit, declining 6.5% year-on-year to $59.6 billion in March, following average growth of 18.4% in the previous three months. 

The fall was led by a 35.9% decline in crude oil imports and a 17.8% drop in gems and jewellery imports. Within that category, imports of pearls, precious and semiprecious stones fell 13.1%, while gold imports fell 31.6%. 

Fertiliser imports, where West Asia is a major supplier, also slowed sharply. Growth eased to just 2.2% in March, compared with average growth of 26.1% in the prior three months. 

Country-wise, imports from Qatar, Saudi Arabia, and the UAE fell 47.9%, 37.3%, and 66.3%, respectively. 

Despite the disruption in West Asia, imports from other regions remained relatively firm, with core imports rising 10.2% year-on-year in March, compared with 14% growth in February. 

Outside West Asia, India’s exports to the US improved sequentially to $8 billion in March from $6.6 billion in February, helped by progress in bilateral trade talks that reduced US tariffs on Indian goods from 50% to 18%, and later to 10%. 

However, uncertainty over the final trade deal remains, leaving the outlook for exports to the US under watch. 

For fiscal 2026, India’s goods exports rose a modest 0.9% to $441.8 billion, while imports increased 7.4% to $774.9 billion. As a result, the trade deficit widened to $333.1 billion, compared with $282.8 billion in fiscal 2025. 

Meanwhile, preliminary estimates showed services exports slipped 1.2% in March, while services imports fell 3.0%. This helped lift the services trade surplus slightly to $18.2 billion, from $18.1 billion a year earlier and $17.8 billion in February.