Domestic credit ratings agency Crisil on Tuesday said some sectors such as fertilisers and diamonds may be slightly impacted by the conflict in the Middle East.
On a broader basis, the conflict has caused only a “negligible disruption” in India's trade so far, it said in a note.
“Some sectors such as fertilisers and diamonds — both cut and polished — may see a slight, but manageable, impact, while for most others impact will be insignificant,” it said.
However, it said that the conflict – which started after the surprise October 7 attacks by Hamas against Israel – has driven up prices of gold and crude oil which need to be watched.
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It said crude oil price movements are especially important for a country like India which depends on imports, and added that elevated crude oil prices have a cascading impact on a host of other sectors that consume the oil itself or linked raw materials.
The agency said India's trade with Israel is relatively low, with the country accounting for only 1.9 per cent of exports and 0.3 per cent of imports in FY23.
Merchandise exports mainly comprise polished diamonds and petroleum products, including refined hydrocarbons, while imports largely comprise industrial equipment, fertilizers, rough diamonds and precious stones, it said.
For domestic diamond polishers, Israel is primarily a trading hub. Exports to the country were 5 per cent of total diamond exports from India last fiscal. Additionally, 2 per cent of all roughs imported are from Israel, it said.
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On the fertilizers front, it said Israel is a major global producer of muriate of potash (MoP) and among the top three countries that India imports from and added that a fourth of all MoP imports last fiscal were from the country.
It was quick to add that the share of MoP (as a final product or as an ingredient in other fertilisers) remains low at 10 per cent of domestic fertiliser consumption. Additionally, India's ability to source from other countries lowers the supply risk.
Gold prices have surged 13-15 per cent since the conflict began to over Rs 60,000 per 10 grams, the agency said, warning that further sharp increases would materially dent the affordability and growth of gold jewellery retailers.
While the overall impact on India remains low as of now, any spread of the conflict leading to disruption of operations at major ports can have some impact, it said.
The agency said it is closely monitoring the developments and will assess the impact on credit quality.
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