Geopolitical Tensions in West Asia Threaten India's Trade Stability

Geopolitical tensions gripping West Asia are putting significant pressure on India's trade dynamics and its broader macroeconomic stability, according to a report revealed by the NITI Aayog. The 'Trade Watch Oct-Dec (Q3) FY 2025-26' details repercussions including a widening current account deficit as tensions persist.

The conflict, which erupted when the U.S. and Israel launched attacks on Iran, has hampered the India-Gulf Cooperation Council Free Trade Agreement, slowing trade diversification efforts. NITI Aayog Vice Chairman Suman Bery emphasized that Free Trade Agreements must be mutually beneficial, highlighting India's sustained trade activity despite geopolitical chaos in 2025.

The report underscores the need for India's gems and jewellery sector to transition towards high-value markets and enhance trade facilitation to boost MSME gross margins. It calls for better financial access, procedural simplification, and a focus on evidence-based policymaking to stabilize and expand the sector amidst these challenges.