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Karnataka’s electronics, textiles, automotive components, petro-linked industries, MSMEs, and other segments may experience margin pressures, higher input and logistics costs, crunch in working capital, and huge shipment delays all on account of the present geopolitical situation in West Asia, said Uma Reddy, president, Federation of Karnataka Chambers of Commerce and Industry (FKCCI).
Sharing the highlights of FKCCI’s latest assessment of the emerging tension in West Asia and it’s likely impact on Karnataka’s economy, she said, for a trade-driven State like Karnataka, the immediate concerns were rising energy costs, increased freight and insurance premiums, and uncertainty in export markets, particularly in the Gulf region.
The ongoing conflict involving Iran has already led to volatility in global crude oil prices and disruptions in key maritime trade routes and these would have multiple repercussions on the trade and business from the State, she added.
According to Ms. Reddy, FKCCI is engaging with government authorities to ensure that industry concerns, particularly those of MSMEs, are addressed proactively. “With prudent policy support and strategic adaptation, Karnataka’s resilient industrial ecosystem can navigate this phase effectively as we did during Covid and in the recent US tariff situation,” she added.
Cascading effect
B.R Ganesh Rao, president, Karnataka Small Scale Industries Association (KASSIA), said that the West Asia crisis has raised serious concerns for trade, industry, financial markets, and service sectors in Karnataka, particularly for Micro, Small, and Medium Enterprises (MSMEs). “While direct trade exposure may be moderate, the cascading indirect effects could significantly impact the State’s economy,” he opined.
According to him, nearly 20% of India’s foreign trade moves through sensitive West Asian sea lanes, especially the strategic Strait of Hormuz. Any further changes may result in shipping delays and container shortages, increased freight and marine insurance premiums, he cautioned.
The sharp escalation of military action in the region was already sending shockwaves through global logistics networks, disrupting both air and ocean freight operations within the region and beyond, stated K. Ravi, senior vice-president, BCIC and chairman, International Business Committee.
Perishable exports
The closure of airspace over Iran, Israel, and Gulf nations, has stalled flights and delayed shipments from Karnataka, severely hitting perishable exports like vegetables, eggs, milk products, and organic ghee to West Asian markets.
Although the State’s exposure to Iran remained limited due to U.S. sanctions, agricultural and pharmaceutical products still accounted for a sizable share, Mr. Ravi said.
Karnataka’s direct trade exposure to Iran is low compared to India’s overall $1.25 billion exports and $1.06 billion imports in 2024, with no state-specific volume data publicly detailed, as per BCIC data.
Anything that happens to West Asia certainly affects Karnataka and India directly or indirectly, as these regions are the first point of connection for business and leisure travellers who are going to Europe or America, observed Ullas Kamath, a city entrepreneur and former chairman of FICCI, Karnataka State Council.
Transit hub
Mr. Kamath said many Kannadigas have their set-ups in Jebel Ali or in other trade-free zones in West Asia. So, if someone was importing from anywhere in the world or exporting to any geography, this region remained the best transit hub. The region offered ease of doing business for Indians, provided convenience of raising the capital/loan or foreign exchanges.
“We always say if you are in West Asia, you have the best of the West and the best of the East, but today, things are uncertain. My friends in Dubai or Abu Dhabi are scared as they see the kind of conflicts increasing. It affects the sentiments and overall mood of investors, brings down business morale, triggers negativity and fear,” Mr. Kamath further said.
English (US) ·