Trade bodies flag impact of West Asia crisis on trade-driven Karnataka

Karnataka faces trade challenges due to the West Asia crisis, impacting industries, logistics, and MSMEs, warns FKCCI.

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.

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.