The conflict in the Middle East may have a direct impact on the Indian economy. According to NITI Aayog, the war with Iran poses risks to New Delhi’s trade and macroeconomic landscape, putting pressure on the current account deficit (CAD) and the exchange rate.In its quarterly trade monitoring report for October-December (Q3) of fiscal year 2025-26, released on Monday, the Center for Policy Research said instability in the region is also slowing down talks on a free trade agreement between India and the Gulf Cooperation Council (FTA). This, in turn, impacts efforts to expand India’s trade base and improve access to new markets.Releasing the report, Suman Berry, Vice Chairman, NITI Aayog, said business deals work both ways.
He added: “Let’s be clear that free trade agreements are not a one-way street, nor should they be. This means that the way we see it as a market access tool, others see it as a market access tool as well.”
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Commenting on the business front in India, Perry emphasized that merchandise trade has remained steady despite the global uncertainty. He also noted that services trade showed a strong performance during the “very confusing year” of 2025.
He also pointed to the role of imports in making the economy more competitive. “For trade economists, imports are much more important than exports,” he said. “Imports are what force you to be competitive, so we should welcome imports as much as we welcome market access.”Berry added that India’s macroeconomic stability remains strong, with the economy growing at a rate of 6% over the past 20 years.The report also focused on the gems and jewelery sector, indicating a shift towards higher value exports.
It called for design-led manufacturing, group-level R&D and promotion of GI-branded products, especially in the field of lightweight, fashion and men’s jewellery.“India’s gems and jewelery sector must enhance trade facilitation and access to raw materials – harmonize free trade agreements, simplify customs duty recovery/refunds, expand access to IIBX, and improve raw material supplies to reduce input costs and boost SME margins,” the report said.The report also recommended facilitating access to financing for micro, small and medium enterprises through collateral-free loans, credit guarantees, interest subsidies, export factoring, and supply chain financing.
