Energy, airlines and now over $50 billion in remittances to India at risk
This report is from this week’s “Inside India” newsletter which brings you timely, insightful news and market commentary on the emerging powerhouse. Subscribe here.
The big story
India can’t seem to escape from the fallout of the escalating conflict in the Middle East. A significant share of the country’s energy imports risk disruptions and its aviation sector is staring at higher costs due to airspace restrictions.
But there’s another multibillion-dollar worry that the country will need to contend with: remittances.
India is the largest recipient of remittances globally and they account for nearly 3.5% of the GDP — that’s higher than the share of exports to the U.S. at 2% of the economy. More than 9 million Indians reside in the Middle East and the money they send home plays a major role in shoring up India’s finances, helping cut its current account deficit.
NEW DELHI, INDIA – MARCH 3: Indian passangers with relaxed expressions at Terminal 3 after their special flight from Riyadh arrive back in India at Indira Gandhi International Airport on March 3, 2026 in New Delhi, India.
Hindustan Times | Hindustan Times | Getty Images
The Indian diaspora in the Gulf countries contributes nearly 38% to India’s total remittance inflows, according to a Citi report. Based on the inflows of $135.4 billion in financial year 2025, the share of gulf countries is to the tune of $51.4 billion.
To put it in perspective: India’s total trade surplus with the U.S. was $58.2 billion in 2025.
According to experts, Indian workers in the Gulf countries are mostly employed in oil services, construction, hospitality and retail sectors, industries particularly vulnerable to the disruption caused by Iranian attacks.
“A sharp decline [in remittance inflows] – particularly if combined with higher oil prices due to the conflict – would worsen India’s external position and could put some pressure on the rupee,” said Alexandra Hermann, lead economist at Oxford Economics.
In recent years, India’s remittances have exceeded its foreign direct investment flows, with those from the UAE alone contributing nearly one-fifth of the flows, second only to the U.S (27.7%).
Collateral damage
The good news, experts tell me, is that only a prolonged conflict in the Middle East will dent India’s remittance flows enough to impact the economy. The bad news is that no one is certain if this conflict will be a short one.
Hermann told me that a “moderate and temporary disruption” is manageable but “a bigger risk” would be if the conflict leads to a slowdown in construction and services activity in the Gulf, affecting Indian migrant workers.
The U.S.-Iran war is in its sixth day and is spreading into the wider region with the U.S. embassies in Riyadh and Kuwait also coming under attack. The U.S. Secretary of State Marco Rubio has vowed that the United States and Israel’s offensive against Iran will increase in its scope and intensity.
Deepa Kumar, head of Asia-Pacific country risk and co-lead of India…
Read More: Energy, airlines and now over $50 billion in remittances to India at risk