Key facts
- Indian businesses are increasing production and securing shipping capacity for the Middle East market.
- FMCG, automotive, and construction equipment companies are preparing for a demand surge following a peace agreement.
- Freight costs are expected to normalize, potentially leading to a 5-9% decline in staple prices.
- Key markets like Iran, Iraq, and Saudi Arabia are expected to offer renewed opportunities for Indian exporters.
- The Middle East is a crucial export market for several Indian companies, contributing significantly to their international revenue.
Indian companies are anticipating a significant rebound in demand from the Middle East following a recently established peace agreement. Businesses across various sectors, including Fast-Moving Consumer Goods (FMCG), automotive, and construction equipment, are actively preparing to meet this resurgence by increasing production capacity, securing vital shipping routes amidst current vessel shortages, and boosting overall exports that were previously hampered by regional conflict.
Large FMCG firms such as AWL Agri Business, Parle Products, and Dabur are elevating their factory capacity utilization for the Gulf market to over 90%, a substantial increase from the 45-50% levels maintained during the conflict. India's leading car manufacturer, Maruti Suzuki, is also making preparations to increase its exports to the Middle East, a region that historically represented over 12% of its international sales before volumes were redirected to other markets in recent months.
JCB India, the country's largest construction equipment maker, is strategically positioning itself to capitalize on reconstruction-driven demand anticipated in the region. Similarly, electrical goods manufacturers like Havells and Blue Star are forecasting a recovery in their business activities within the Middle East.
Angshu Mallick, executive deputy chairman of AWL Agri Business, noted that the reopening of Middle East markets and the normalization of freight rates, which had included a nearly $100 per tonne war surcharge, would lead to easing prices. He projected that staple prices could decrease by 5-9%, and markets such as Iran, Iraq, and Saudi Arabia would once again present opportunities for Indian exporters of basmati rice, atta, and edible oils. AWL Agri Business currently exports products worth approximately Rs 1,000 crore annually to the Middle East.
Deepak Shetty, chief executive of JCB India, highlighted that the cessation of conflict opens considerable opportunities for the Indian construction equipment industry throughout the region. He also mentioned that reduced freight costs would benefit exports to Europe and the US. Regarding Iran, Shetty advised companies to carefully evaluate the prevailing sanctions and regulatory landscape, but acknowledged the potential for demand to emerge over time due to the extensive reconstruction needs.
The Middle East remains a critical overseas market for Indian companies, largely due to its geographical proximity and the substantial Indian diaspora residing there. The region accounts for approximately 4% of Marico's total revenue and nearly 35% of Dabur's international business, while Havells generates about 40% of its export revenue from this area.
Mayank Shah, vice-president at biscuit maker Parle Products, stated that the company intends to increase its export-related capacity utilization from 50-60% to nearly 90%. He added that while margins were pressured during the conflict, they are expected to begin recovering now, with supply chains normalizing and operations becoming more streamlined.