The ongoing conflict in the Middle East can have a direct impact on India’s economy. According to Niti Aayog, the Iran war poses risks to New Delhi’s trade and macroeconomic outlook, leading to pressure on the current account deficit (CAD) and exchange rate.In its quarterly report Trade Watch October-December (Q3) fiscal year 2025-26 released on Monday, the policy think tank said instability in the region is also slowing down negotiations on an India-Gulf Cooperation Council (GCC) free trade agreement (FTA). This, in turn, is impacting India’s efforts to broaden its trade base and improve access to new markets.While releasing the report, NITI Aayog Vice Chairman Suman Berry said trade deals work both ways. “Let us be clear that FTAs are not a one-way street, nor should they be, which means that just as we are looking at them as a tool for market access, others are also looking at them as a tool for market access,” he said.
Commenting on India’s trade front, Berry highlighted that merchandise trade remains stable despite global uncertainty. He also said that services trade has shown strong performance during the “very confusing year” of 2025.He also pointed to the role of imports in making the economy more competitive. He said, “For trade economists, imports matter much more than exports. It is imports that force you to be competitive, so we should welcome imports as much as we welcome market access.”Berry said India’s macroeconomic stability remains strong, with the economy growing at an average rate of 6% over the past 20 years.The report also focuses on the gems and jewelery sector, suggesting a shift towards higher value exports. It called for the promotion of design-led manufacturing, cluster-based research and development, and promotion of GI-branded products, especially light weight, fashion and men’s jewellery.“India’s gems and jewelery sector should strengthen trade facilitation and raw material access – aligning FTAs, streamlining duty drawbacks/refunds, expanding IIBX access and improving raw material supply to cut input costs and boost MSME margins,” the report said.It also recommended easier access to finance for MSMEs through collateral-free loans, credit guarantees, interest subvention, export factoring and supply chain finance.
