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big story
India is unlikely to escape the aftermath of the escalating conflicts in the Middle East. Most of the country’s energy imports are at risk of disruption, and the aviation sector is facing higher costs due to airspace restrictions.
But there is another multibillion-dollar concern the country must address. That’s remittance.
India is the world’s largest recipient of remittances, accounting for nearly 3.5% of GDP, which is higher than the 2% share of exports to the US in the economy. More than 9 million Indians live in the Middle East, and their remittances to their home countries play a major role in strengthening India’s finances and contributing to reducing its current account deficit.
NEW DELHI, INDIA – MARCH 3: Indian passengers look relaxed in Terminal 3 after returning to India on a special flight from Riyadh at Indira Gandhi International Airport in New Delhi, India on March 3, 2026.
Hindustan Times | Hindustan Times | Getty Images
The Indian diaspora in the Gulf accounts for nearly 38% of total remittances to India, according to a Citi report. Based on inflows of $135.4 billion in fiscal year 2025, the share of Gulf countries reaches $51.4 billion.
To put this in perspective, India’s total trade surplus with the US was $58.2 billion in 2025.
Experts say most Indian workers in the Gulf are employed in sectors such as oil services, construction, hospitality and retail, which are particularly vulnerable to disruption from an Iranian attack.
“A sharp decline[in remittance inflows]could worsen India’s external position and put pressure on the rupee, especially if coupled with conflict-induced oil price increases,” said Alexandra Harman, chief economist at Oxford Economics.
In recent years, India’s remittances have outpaced foreign direct investment flows, with remittances from the UAE alone accounting for almost a fifth of its flows, second only to the United States (27.7%).
collateral damage
The good news, experts say, is that India’s remittance flows will decline enough to impact the economy only if the Middle East conflict becomes protracted. The bad news is that no one knows whether this conflict will be short-lived.
Harman said a “moderate and temporary disruption” could be managed, but a “greater risk” would be if the conflict slowed down construction and services in the Gulf and affected Indian migrant workers.
The war between the United States and Iran is entering its sixth day and has spread to a wider region, with attacks on the U.S. embassies in Riyadh and Kuwait. US Secretary of State Marco Rubio has vowed that US and Israeli attacks against Iran will increase in scope and intensity.
Deepa Kumar, head of Asia Pacific country risk and co-head of India research at S&P, said if the dispute lasts beyond six months, it will have a significant impact on India’s economy.
If the conflict is contained, “there could be an initial shock to remittances” from the Middle East, but that would be limited to spot labor contracts, Kumar said. In the coming days, her team will begin assessing how a prolonged conflict could affect the economy.
As both sides intensify their attacks, the likelihood of prolonged hostilities is increasing. US President Donald Trump said on Monday that military operations in Iran could last “much longer” than the estimated four to five weeks.
Citi said in a note on Monday that if the conflict is prolonged, remittances will be “adversely impacted” as income opportunities for the Indian diaspora are affected. But in the short term, “there could be an unintended positive impact if ‘risk aversion’ leads to increased repatriations,” the memo said.
Will the country suffer collateral damage on multiple fronts in a largely unrelated war, or will the conflict end before it seriously affects the country? We will only know in the coming months. Watch this space.
need to know
New Delhi’s oil supply concerns. India imports nearly 85% of its crude oil, and as global oil prices rise due to conflicts in the Middle East, already large energy import costs are expected to rise. Indian airlines are also facing rising costs due to restrictions on the use of air space over Gulf countries.
India and Canada pledge to deepen ties. During Prime Minister Mark Carney’s visit to New Delhi earlier this week, the two countries pledged to put aside their differences and foster closer ties, pledging to deepen trade.
The Indian economy grew at a faster pace. Economic growth in the quarter ended December was 7.8%, faster than expected. The latest print edition comes after the government overhauled the framework for calculating economic output to improve accuracy.
very soon
March 4-7: Finnish President Alexander Stubb visits India.
March 9: Rajputana Stainless IPO opens.
