The ongoing West Asia conflict threatens India’s $98.7 billion annual imports from the region, with critical industrial raw materials like limestone, sulphur, gypsum, and steel inputs facing severe supply disruptions through the Hormuz Strait. Prime Minister Narendra Modi highlighted these trade vulnerabilities in Lok Sabha, noting that ship movements on this vital corridor have become challenging, directly impacting construction, chemicals, and manufacturing sectors central to India’s ₹10 lakh crore infrastructure push.
India’s industrial supply chains are heavily Gulf-dependent beyond energy. West Asia supplied key non-energy commodities essential for domestic production: limestone (68% of imports, $483 million annually) powers cement manufacturing, sulphur (66%, $420 million) feeds fertilizer and chemical plants, gypsum (62%, $129 million) supports construction, and Direct Reduced Iron or DRI (59%, $190 million) fuels steel production. These inputs aren’t stockpiled like crude oil, making factories vulnerable to immediate shortages.
The Hormuz blockade handling 20% of global trade flows has spiked freight costs by 300% and triggered war risk insurance premiums, delaying shipments from Oman, UAE, and Saudi Arabia. Cement producers, already facing domestic limestone shortages, now scramble as Gulf imports (68.5% share) falter. Fertilizer makers report sulphur price surges of 25-30%, threatening kharif season output. Steel MSMEs in Gujarat and Maharashtra face DRI scarcity, with rolling mills halting operations amid ₹500-700/tonne cost hikes.
Policy response target alternate sourcing
Modi’s emphasis on “daily inter-ministerial coordination” signals urgent diversification. Commerce Ministry sources confirm exploratory deals with Russia, South Africa, and Morocco for sulphur and gypsum, while domestic FGD gypsum from power plants (12-17 million tonnes potential) aims to cut import reliance. Government prioritizes MSMEs via input subsidies and port clearances at Mundra-Kandla, but short-term spikes hit small cement/fertilizer units hardest.
Steel sector pivots to scrap-based production, though DRI plants (capacity 30 million tonnes) idle without Gulf pellets. Limestone imports shift to Vietnam and Indonesia, adding $20-30/tonne freight premiums. Fertilizer firms tap Canada and US for sulphur, echoing crude diversification from 82% Gulf reliance (2022) to 48% (2025).
| Commodity | Gulf Dependency | Impacted Sectors |
|---|---|---|
| Limestone | Heavy (UAE/Oman) | Cement production |
| Sulphur | 65%+ (GCC) | Fertilizers/Chemicals |
| Gypsum | 87% (Oman) | Construction |
| DRI/Steel | Significant | Steel manufacturing |
Infra boom faces supply crunch
India’s cement demand (600 million tonnes targeted FY26) and ₹10 lakh crore infra spend hinge on steady raw materials. Cement stocks dipped 5% post-Hormuz alerts; Nifty Realty index shed 3%. Fertilizer imports (35 million tonnes needed) risk urea shortages, impacting 140 million farmer households. Steel output (140 million tonnes FY25) faces 2-3% contraction if DRI flows halt beyond Q1.
Commerce Minister Piyush Goyal’s diversification push mirroring Brazil/Cambodia chemical export gains accelerates. Long-term bets include IMEEC corridor bypassing Hormuz and domestic mining reforms. Yet, MSMEs (60% of industrial output) lack buffers, urging priority credit lines.
As conflict enters week four, Modi’s diplomacy seeks resolution while trade desks activate Russia-Africa pivots. Gulf’s $121.7 billion imports (FY25, up 15%) underscore urgency: industrial resilience now tests India’s $5 trillion economy goal.