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The large story
India cannot appear to escape from the fallout of the escalating conflict in the Middle East. A major share of the nation’s power imports risk disruptions and its aviation sector is staring at greater prices due to airspace restrictions.
But there’s one other multibillion-dollar fear that the nation will want to cope with: remittances.
India is the most important recipient of remittances globally and they account for almost 3.5% of the GDP — that is greater than the share of exports to the U.S. at 2% of the economic system. More than 9 million Indians reside in the Middle East and the cash they ship dwelling performs a serious function in shoring up India’s funds, serving to lower its present account deficit.
NEW DELHI, INDIA – MARCH 3: Indian passangers with relaxed expressions at Terminal 3 after their particular flight from Riyadh arrived again in India at Indira Gandhi International Airport on March 3, 2026 in New Delhi, India.
Hindustan Times | Hindustan Times | Getty Images
The Indian diaspora in the Gulf nations contributes almost 38% to India’s whole remittance inflows, in accordance to a Citi report. Based on the inflows of $135.4 billion in monetary 12 months 2025, the share of gulf nations is to the tune of $51.4 billion.
To put it in perspective: India’s whole commerce surplus with the U.S. was $58.2 billion in 2025.
According to consultants, Indian staff in the Gulf nations are principally employed in oil providers, building, hospitality and retail sectors, industries significantly weak to the disruption attributable to Iranian assaults.
“A sharp decline [in remittance inflows] – particularly if combined with higher oil prices due to the conflict – would worsen India’s external position and could put some pressure on the rupee,” mentioned Alexandra Hermann, lead economist at Oxford Economics.
In latest years, India’s remittances have exceeded its overseas direct funding flows, with these from the UAE alone contributing almost one-fifth of the flows, second solely to the U.S (27.7%).
Collateral injury
The excellent news, consultants inform me, is that solely a chronic conflict in the Middle East will dent India’s remittance flows sufficient to influence the economic system. The unhealthy information is that nobody is for certain if this conflict might be a brief one.
Hermann informed me {that a} “moderate and temporary disruption” is manageable however “a bigger risk” can be if the conflict leads to a slowdown in building and providers exercise in the Gulf, affecting Indian migrant staff.
The U.S.-Iran conflict is in its sixth day and is spreading into the broader area with the U.S. embassies in Riyadh and Kuwait additionally coming underneath assault. The U.S. Secretary of State Marco Rubio has vowed that the United States and Israel’s offensive in opposition to Iran will enhance in its scope and depth.
Deepa Kumar, head of Asia-Pacific nation risk and co-lead of India analysis chapter at S&P informed me that if the conflict lasts past six months, it is going to have a cloth influence on the Indian economic system.
In case of a contained conflict “there could be some initial shocks to remittances” from the Middle East however that might be restricted to spot employee contracts, Kumar mentioned. Over the following few days her workforce will begin assessing how a chronic conflict may have an effect on the economic system.
Chances of the hostilities lasting longer have risen as each side intensify their assaults. U.S. President Donald Trump on Monday mentioned the army operation in Iran may go on “far longer” than the estimated 4 to 5 weeks.
Citi in its observe on Monday mentioned that if the conflict lasts lengthy, remittances can be “negatively impacted” as earnings alternatives of the Indian diaspora will get affected. In the quick run, nevertheless, “there could be a perverse positive impact if ‘risk aversion’ leads to more repatriation,” the observe mentioned.
Will the nation endure collateral injury on a number of fronts from a conflict it has little to do with, or will the conflict finish earlier than the nation sees critical repercussions? We’ll know that for certain solely in the months to come — watch this house.
Need to know
New Delhi oil provide worries. India imports almost 85% of its crude and as world oil costs enhance due to the Middle East conflict, the nation’s already substantial power import invoice is predicted to balloon. Indian airlines are additionally seeing value escalations due to restriction on use of airspace over Gulf nations.
India and Canada vow to deepen ties. During Prime Minister Mark Carney’s go to to New Delhi earlier this week the 2 nations put differences apart, pledged to foster nearer ties and vowed to deepen commerce.
India’s economic system grew at a quicker tempo. The economic system grew at a faster-than-expected charge of seven.8% through the quarter ended December. The newest print comes after the federal government overhauled the framework for calculating financial output to enhance accuracy.
Coming up
March 4-7: President of Finland Alexander Stubb visits India.
March 9: Rajputana Stainless IPO opens
