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West Asia conflict threatens India’s $11.8 billion agri exports: GTRI

March 07, 2026 5 min read Economics International Relations GS Paper 2 (India's foreign relations trade policy) GS Paper 3 (Indian economy food security agriculture)
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What Happened

  • A report by the Global Trade Research Initiative (GTRI) flagged that India's agricultural exports to West Asia — valued at $11.8 billion — are under serious threat from the escalating conflict in the region.
  • Rice is the most exposed product: India exported $4.43 billion of rice to West Asia in 2024-25, accounting for 36.7% of its total global rice exports, with Gulf markets critical for producers in Punjab, Haryana, Uttar Pradesh, Andhra Pradesh and Telangana.
  • Cereals, fruits, vegetables and spices worth $7.48 billion went to West Asia in 2025, representing 29.2% of India's global exports in this category; dairy exports of $281 million to the region accounted for 28.9% of total Indian dairy exports.
  • Key spice exports at risk include nutmeg, mace and cardamom ($295.5 million), cumin and coriander seeds ($163 million), and ginger and turmeric ($173 million).
  • Rising insurance costs, shipping disruptions through the Red Sea and Gulf of Aden, and uncertainty in logistics are the primary channels through which the conflict is hitting trade flows.

Static Topic Bridges

India's Agricultural Export Architecture and APEDA

India's agricultural exports are governed under the Agricultural and Processed Food Products Export Development Authority (APEDA) Act, 1985. APEDA, under the Ministry of Commerce and Industry, promotes exports of scheduled agricultural products including fresh fruits and vegetables, processed food, marine products and livestock. India is the world's second-largest rice producer and accounts for approximately 40% of global rice trade — making West Asia's demand critical to maintaining that share. The export chain for rice involves state-level procurement infrastructure, milling capacity concentrated in Punjab and Haryana, and dedicated port terminals at JNPA (Mumbai), Kandla, and Visakhapatnam.

  • India exported over $50 billion of agricultural and allied products in 2023-24 (APEDA data)
  • Rice exports alone crossed ₹1 lakh crore in 2023-24
  • West Asia (GCC + broader Middle East) absorbs roughly one-fifth of India's total agricultural exports
  • Non-basmati rice ban (July 2023–October 2024) demonstrated how export policy shifts directly affect global rice prices by up to 32%

Connection to this news: With West Asia absorbing 36.7% of India's rice exports, prolonged conflict risks market loss, forced rerouting costs, and farmer-level income shocks in major rice-growing states.

India–GCC Trade Relations and the Bilateral Framework

The Gulf Cooperation Council (GCC) — comprising Saudi Arabia, UAE, Qatar, Kuwait, Bahrain and Oman — is India's largest trading partner bloc, with two-way trade exceeding $180 billion annually. India and the GCC signed a Framework Agreement on Economic Cooperation in 2004, with an India-GCC Free Trade Agreement under negotiation since 2006 and resumed in 2021. Beyond trade, the Gulf hosts approximately 8.9 million Indian diaspora workers who remit around $35–40 billion annually — the single largest source of India's total remittances. Agricultural exports to the GCC are exempt from import duties in most Gulf states due to bilateral MFN treatment, making market access relatively smooth under normal conditions.

  • UAE–India CEPA (Comprehensive Economic Partnership Agreement) signed March 2022 — operational May 2022; provides zero duty access for Indian agricultural exports to UAE
  • India's merchandise exports to GCC: ~$67 billion (2023-24)
  • Remittances from GCC to India: ~$40 billion/year (largest single regional source)
  • Food security is a political priority for GCC states that import 80–90% of food needs

Connection to this news: Conflict disruption to Indian agricultural exports does not merely affect trade balances — it threatens a relationship undergirded by diaspora labour, remittances, and a nascent free trade architecture with the UAE already operational.

Red Sea Shipping Crisis and the Cape of Good Hope Rerouting

The Red Sea carries approximately 15% of global seaborne trade, including 8% of global grain trade and 12% of global oil. Since November 2023, Houthi attacks on commercial vessels in the Red Sea and Gulf of Aden (over 190 incidents by October 2024) have forced shipping companies to reroute around the Cape of Good Hope (Southern Africa) — adding 10–14 days to voyages and 20–25% to freight costs. Container freight charges through the Red Sea/Suez route ballooned by up to 250% at peak crisis, with a 40-foot container passage rising from ~$1,148 pre-crisis to ~$4,000. The escalation of the Iran-Israel conflict in early 2026 has further compounded this by threatening closure of the Strait of Hormuz — a separate but adjacent choke point.

  • Red Sea/Suez route handles ~30% of global container traffic
  • Cape rerouting adds ~3,500–4,000 nautical miles to Asia-Europe routes
  • Wheat shipments through Red Sea fell ~40% in January 2024 during peak Houthi attacks
  • India's exporters face higher freight, insurance premiums, and longer payment cycles when rerouting is mandatory

Connection to this news: India's rice and spice exporters are directly exposed because major trade lanes between Indian west coast ports and Gulf/Red Sea destinations are precisely those being disrupted — raising landed cost of Indian goods and making them less competitive versus regional alternatives.

Minimum Support Price (MSP) and Farmer Income Vulnerability

The MSP system, administered by the government on CACP (Commission for Agricultural Costs and Prices) recommendations, sets a floor price for 23 crops. For rice (paddy), MSP ensures that even in adverse global markets, farmers receive a government-declared minimum. However, MSP protection does not extend to export price realisation — if West Asian buyers reduce procurement or switch to alternative suppliers (Thailand, Vietnam, Pakistan), Indian farmers lose the premium export price that exceeds domestic MSP. States like Punjab and Haryana have surplus production systems geared for export; a loss of West Asian market share would intensify pressure on FCI procurement and domestic buffer stocks.

  • MSP for Common Grade Paddy 2024-25: ₹2,300 per quintal (Grade A: ₹2,320)
  • India holds over 80 million tonnes of buffer stock of foodgrains (well above 30–40 MT norm)
  • FCI's mandate: price support for farmers + distribution via PDS + buffer stock maintenance
  • Export premium for basmati: 2–4x over domestic price, making Gulf markets financially critical

Connection to this news: Loss of Gulf export markets would push more rice into domestic channels, suppressing market prices below MSP and increasing the fiscal cost of government price support procurement — creating a feedback loop from geopolitics to India's agricultural subsidy burden.

Key Facts & Data

  • India's total agricultural exports to West Asia (2024-25): $11.8 billion (GTRI)
  • Rice exports to West Asia: $4.43 billion = 36.7% of India's total rice exports
  • Cereals, fruits, vegetables and spices to West Asia: $7.48 billion = 29.2% of category exports
  • Dairy exports to West Asia: $281.1 million = 28.9% of total dairy exports
  • Spice exports: Nutmeg/mace/cardamom $295.5 mn; Cumin/coriander $163 mn; Ginger/turmeric $173 mn
  • India's share of global rice trade: ~40%
  • India–GCC two-way trade: >$180 billion annually
  • UAE–India CEPA: operational since May 2022
  • Red Sea container freight increase at peak crisis: ~250% above pre-November 2023 levels
  • Cape of Good Hope rerouting adds 10–14 days and ~20–25% to freight costs