What Happened
- The Indian government convened a high-level review of trade risks arising from the Iran-Israel war and the broader West Asia conflict following US-Israel strikes on Iran in late February 2026
- An 'Inter-Ministerial Group (IMG) for Supply Chain Resilience' has been constituted, meeting daily to monitor developments
- The IMG comprises members from the Department of Financial Services, Ministry of External Affairs, Ministry of Shipping, Ports and Waterways, Ministry of Petroleum and Natural Gas, and the Central Board of Indirect Taxes and Customs (CBIC)
- India exported goods worth $50 billion to 13 West Asian countries during April-December 2025, representing 15% of total outbound shipments
- Imports from the region stood at $116.45 billion in the same period — roughly one-fifth of India's total inbound shipments
- Industry flagged vulnerabilities at the Strait of Hormuz and the Bab el-Mandeb as the two critical chokepoints linking India's trade to the Gulf, Europe, and North America
- Rerouting via the Cape of Good Hope could add 15-20 days to transit times, raising freight rates, insurance costs, and working capital pressure
Static Topic Bridges
India's Trade Exposure to West Asia
West Asia is India's single most important trading region collectively. The 13 countries in the region — including UAE, Saudi Arabia, Iraq, Qatar, Kuwait, Oman, Iran, Bahrain, Jordan, Egypt, Israel, Turkey, and others — together account for a disproportionate share of both India's exports and imports.
On the export side, India ships engineering goods, gems and jewellery, petroleum products (re-exports), pharmaceuticals, textiles, and food products to the region. On the import side, the dominance is crude oil and natural gas, but the region also supplies fertilisers, petrochemicals, and gold. The Gulf Cooperation Council (GCC) countries — Saudi Arabia, UAE, Kuwait, Qatar, Bahrain, Oman — are also the primary destination for the Indian diaspora of roughly 9 million people, whose remittances constitute India's largest inward transfer channel.
- India's total exports to West Asia (Apr-Dec FY2025-26): ~$50 billion (15% of total exports)
- India's total imports from West Asia (Apr-Dec FY2025-26): ~$116.45 billion (~20% of total imports)
- UAE is India's third-largest trading partner overall
- India-UAE Comprehensive Economic Partnership Agreement (CEPA) signed in 2022 targets bilateral trade of $100 billion by 2030
Connection to this news: The sheer scale of trade flows means that even a temporary disruption to West Asian shipping lanes would cascade into supply-chain delays, cost escalation, and inventory shortfalls across multiple Indian industries.
Inter-Ministerial Coordination: India's Crisis Response Architecture
India's response to supply-chain shocks has historically been ad hoc, with sector-specific ministries responding independently. The 2022 Sri Lanka economic crisis and 2024 Red Sea disruptions prompted more structured thinking about coordinated resilience planning. The IMG for Supply Chain Resilience created during this West Asia crisis is the latest iteration of this approach.
The IMG model mirrors the Economic Task Force mechanisms used during COVID-19, where multiple ministries were brought under a single coordination structure with regular reporting cycles. CBIC's inclusion ensures that customs facilitation — faster clearances, warehouse relaxations, duty adjustments — can be deployed as a trade-easing instrument. MEA's inclusion allows diplomatic outreach to transit-country governments to secure alternative shipping agreements.
- IMG meets on a daily basis to monitor shipping, logistics, exports, and critical import vulnerabilities
- CBIC can issue temporary duty waivers or facilitate bonded warehousing for essential imports
- Ministry of Shipping can engage alternative port agreements — e.g., Chabahar (Iran) access, though ironically Iran is the conflict party
- India has Free Trade Agreements and CEPA arrangements with UAE, GCC discussions ongoing, and Israel defence partnerships — these complicate a simple "neutral" positioning
Connection to this news: The daily IMG meetings signal that the government views the West Asia disruption as a sustained, serious risk rather than a temporary spike — requiring institutional coordination rather than ministry-level responses alone.
Maritime Chokepoints and India's Strategic Geography
India's peninsula geography makes it inherently dependent on sea lanes. Over 90% of India's trade by volume and 70% by value moves through maritime routes. Two chokepoints are critical in the West Asia context:
The Strait of Hormuz (between Iran and Oman) is the gateway for Gulf oil, gas, and petrochemical exports. The Bab el-Mandeb Strait (between Yemen and Djibouti/Eritrea) connects the Red Sea to the Gulf of Aden and is the route for India-Europe trade. Houthi attacks in the Red Sea (from late 2023) had already disrupted Bab el-Mandeb traffic before the Iran escalation added Hormuz risks simultaneously.
- Strait of Hormuz: ~33 km wide at narrowest; 20 million b/d crude transits it
- Bab el-Mandeb: connects Red Sea to Indian Ocean; Houthi-linked disruptions since late 2023 diverted ships via Cape of Good Hope
- Cape of Good Hope rerouting: adds ~15-20 days; freight rates approximately doubled during 2024 Red Sea crisis
- India's own strategic location on the Indian Ocean Rim gives it significant influence — but also exposure — to disruptions in these lanes
Connection to this news: The government's review specifically flagged both chokepoints, reflecting awareness that the current crisis compresses two risk nodes simultaneously — Hormuz from the Iran conflict and Bab el-Mandeb from the ongoing Houthi threat in Yemen.
Key Facts & Data
- India's exports to West Asia (Apr-Dec FY2025-26): ~$50 billion (15% of total exports)
- India's imports from West Asia (Apr-Dec FY2025-26): ~$116.45 billion (~20% of total imports)
- IMG composition: Dept of Financial Services, MEA, Ministry of Shipping, Ministry of Petroleum, CBIC
- IMG meets daily to track vulnerabilities in shipping, logistics, exports, and critical imports
- Cape of Good Hope rerouting: adds 15-20 days to transit + significant freight and insurance cost increase
- Indian diaspora in Gulf: ~9-10 million people; remittances from GCC form a major share of India's ~$125 billion total annual inward remittances
- Bab el-Mandeb: already under Houthi threat since 2023; now Hormuz adds a second simultaneous chokepoint risk
- India-UAE CEPA (2022): targets $100 billion bilateral trade by 2030