Thiruvananthapuram: The ongoing conflict involving Israel, the US, and Iran is shaking up the Indian economy, especially in Kerala. Many people from Kerala work in the Gulf, and experts believe this unrest will lead to job losses and lower salaries there.
Recent reports suggest that economic growth in Gulf Cooperation Council (GCC) countries is slowing. Oxford Economics predicts a drop in growth from 4.6% to 4.4%, translating to a potential $8.5 trillion loss. Rejimon Kuttappan, an expert on migrant labor rights, points to the halted oil production and the blocked Strait of Hormuz as major issues. With oil storage full and exports stalled, the oil industry is severely affected.
The crisis isn’t limited to oil. About 45% of the chemical fertilizers used in India come from West Asia, and supply chains are now disrupted. Oxford Economics warns that a financial crisis could be looming in the West Asian region, compounded by reduced consumer spending.
The tourism and construction sectors are also in trouble. Roughly 60% of flights are suspended, stalling travel to the Gulf. Major events have been canceled, leading to a downturn in tourism. In construction, delays in material deliveries mean that projects are lagging, which is pushing up costs and reducing worker benefits.
Banking services in some GCC areas have also been interrupted, affecting many employees, particularly those from India. Reports indicate that some workers only received part of their salaries for March, and the situation continues into April. Prominent labor suppliers from Kerala are struggling to pay their staff.
Rejimon warns that if the conflict stretches into April, Kerala might face serious economic challenges. A dip in remittances could destabilize the state, where many families rely heavily on money sent from abroad. Of the approximately 30 million Indians in the Gulf, about 3 million are Malayalis. Kerala receives roughly 2.5 lakh crore of the 10 lakh crore sent back to India annually, making up around 16% of its budget.
Historically, situations like the COVID pandemic and the 2008 financial crisis have shown how dependent Kerala is on Gulf remittances. Rising costs and decreased fertilizer imports from the Gulf could harm local farmers, threatening food security and impacting the public distribution system.
Dr. Ashraf Kadakkal from the University of Kerala highlights that new workers may face immediate job losses, while seasoned staff might experience pay cuts. He suggests that Arab nations realize the limitations of relying solely on American protection.
Foreign affairs expert TP Sreenivasan notes that the conflict is unpredictable and could be a tool for US diplomacy. He believes the current stalemate is unusual and indicates that Iran might not be seeking peace talks. For India, any aggression against GCC nations is seen as an attack on its interests, highlighting the need for diplomatic efforts to promote a ceasefire.
With a new government coming into power in Kerala, there’s pressure to address the challenges faced by Malayalis in the Gulf. The Kerala International Centre has prepared a memorandum to guide the new leadership on protecting its citizens and maintaining vital diplomatic relationships.
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INDIAN ECONOMY, KERALA, MALAYALIS, GULF COOPERATION COUNCIL, ISRAEL US IRAN WAR, PROLONGED MIDDLE EAST CONFLICT WILL HAVE DEVASTATING IMPACT ON KERALA
