A new report from the United Nations Development Programme has shown that the military conflict in West Asia is likely to have significant spillover effects on the economies of Asia-Pacific nations, and India will be one of the highest affected countries in terms of these effects. According to the report, over 2.5 million people in India could be forced into poverty due to a major escalation of military conflict.

That is 25 lakh (2.5 million) people!

Suddenly that “global issue” feels very local, no? 

The title of the report is “Military Escalation in the Middle East: Human Development Impacts Across Asia and Pacific” which states that disruption due to military conflict will result in increased fuel prices, disruption of shipping routes, disruption of supply chains, and disruption of food supplies and, as such, will affect many countries that are many kilometres away from the conflict.

UNDP Administrator Alexander De Croo explains:

“War is development in reverse. Conflict can undo in weeks what countries have built over years.”

In his comments, he further states that the economic shock generated by the escalation of military conflict in the Middle East will not only be felt by the countries directly involved in the geopolitical conflict. Instead, the economic fallout will be felt most strongly by the poorest and weakest economies that do not have sufficient operating capital to absorb the rapid increase in the price of food and the price of energy.

In other words, the weakest and poorest countries will be the ones who will be harmed first and hardest.

Rising Numbers on Poverty in India

Poverty levels in India could rise significantly, from approximately 400,000 people to nearly 2.5 million under the current stressful, and unresolved COVID-19 situation due to continuance of disruptions and delays in supply chains. A long-term analysis suggests that India’s poverty rate could increase from 23.9% to 24.2% under the stringent impact of COVID-19, which sounds like a small increase, but it actually represents more than 24 lakhs additional individuals falling below the poverty line.

This report also indicates that India may lose between 0.03 – 0.12 years of Human Development because of the potential long duration of COVID-19.

To highlight, many years of hard work were accomplished with the goals towards Human Development over countless years, and it will only take a very short amount of time with COVID-19 to possibly erase those accomplishments.

India has been exposed to multiple issues due to their energy dependency.

According to the report, oil needs are over 90% reliant on imports, over 40% of crude oil and nearly 90% of LPG (Liquefied Petroleum Gas ) are dependent upon West Asia.

India will virtually feel the impact immediately if there are any tensions in West Asia that disrupt oil, transport, or insurance.

In addition to this, over 45% of fertilizer imported into India also comes from West Asia, and approximately 85% of the domestic urea production comes from the imported regasified LNG (Liquid Natural Gas).

Therefore, if energy prices increase due to costs that the farmer incurs to produce food, then prices of food will increase.

Kharif Moons can cause problems for the farmer

The timing of the report also denotes a major concern due to the fact that as a result of the COVID-19 pandemic, a prolonged supply chain disruption will likely overlap with the Kharif planting season in June. Urea is currently at 6.114 million metric tons as of this year in stock to protect against short-term supply challenges. However, it may not be sufficient to support producers if the current supply chain disruption impacts planting in a timely manner.

For farmers who rely on the monsoon for their livelihoods, this warning is crucial and quite serious.

There Is a Trade, Shipping and Delay Situation that is Already Present

India has substantial trade exposure to West Asia.

West Asia makes up about 14% of India’s exports. Nearly $48 billion worth of non-oil exports from India are dependent on consumption from the Gulf region. Examples include basmati rice, tea, gems & jewellery, textiles, and apparel.

The report also highlights that there are flight cancellations and disruptions in shipping between India and Bangladesh affecting cargo shipment due to redirection of logistics routes.

When people are joking “global financial markets are crashing,” there are literally containers stuck behind that statement.

Young People Will See an Impact as Well

This will have a direct impact on employment for many young people.

The UNDP is projecting the probability of job loss is increasing in industries that rely on imported supplies or trade to/from the Gulf Region. In India, approximately 90% of the labour force is found in the informal sector, thus job security is already at great risk. The report cautions that industries consisting of Micromedium enterprises(MSME) such as:

    • Construction materials

    • Hospitality services

    • Food Processing

    • Steel Manufacturing

    • Precious Stones and Diamond jewellery

…will see more expenses, supply chain interruption, delayed shipments, reduced working hours, interruption of operation and employee layoffs.

When MSMEs struggle, many youth who are trying to enter the workforce for the first time will bear the brunt of the impact first.

The Gulf Connection Nobody Talks About

The report also calls attention to remittance dependence.

According to the Ministry of External Affairs data used in this report, there were 9.37 million Indian Workers living in Gulf Cooperation Council countries as of October 2024 and they send back approximately 38% to 40% of all inward remittances to India.

Many of those remittances go to support households in rural and semi urban India. If the economies of the Gulf Region slow down resulting in a decrease in job opportunity or restricted mobility, many Indian families will suffer because of that.

Even Healthcare Could Become More Expensive 

According to this report, due to the disruption of shipping through the Strait of Hormuz, raw materials needed by companies manufacturing medical devices in India could increase 50%. 

The report also mentions that wholesale drug prices have shifted in some instances due to supply chain pressures, resulting in as much as a 10%-15% increase in the price of some prescription medications in India.

Yes, Geopolitics affects your pharmacy bill just like any other product.

UNDP States Action By Governments Needed.

The UNDP states that countries should provide targeted and temporary cash transfers specifically for assistance to poor households and that globally, anywhere from $6 billion to $10 billion of cash transfer funding are necessary for providing humanitarian assistance.

Additionally, UNDP states that countries should operate smarter subsidy programs, such as those that focus on either basic utility (i.e. electricity or cooking gas) or cooking fuel and avoid blanket subsidy programs that primarily assist the wealthier segments of their population.

So… Does The Government Care?

That’s the question many young people ask whenever reports like these are made public.

They see serious headlines and urgent detailed reports about how everything from the price of fuel to food and rent and job security will only continue to increase in cost.

The conclusion is that UNDP is making it plain that conflicts don’t stay in their place of origin. 

They travel on a shipping container and through shipping routes or through remittance flows and through the money spent at your local grocery store and finish at your house.