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From chemicals and plastics to packaging and FMCG, businesses are bearing the brunt of the West Asia war.
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The fallout of the West Asia conflict is increasingly being felt across India’s manufacturing sector. The disruption is now testing the resilience of factories, supply chains and balance sheets of domestic industries in India.
Addressing the Lok Sabha on March 23, 2026, Prime Minister Narendra Modi described the escalating West Asian conflict as a “worrisome situation”, drawing parallels to the cooperation needed during the COVID-19 pandemic.
From chemicals and plastics to packaging and FMCG, businesses are bearing the brunt of the West Asia war. “At a micro level, the biggest challenge for us has been natural gas. We depend heavily on it, and supply has been cut by nearly 50 per cent,” said Vishal Sharma, CEO of Godrej Industries’ chemicals business.
He said that the reasons range from logistical bottlenecks to shutdowns of critical gas facilities in the region. But the pressure doesn’t end with energy. The ripple effects, especially on the logistics side.
“Freight rates have increased substantially by over 50 per cent in some cases, and we are also seeing surcharges of thousands of dollars per container. Shipping lines are responding to the crisis quickly, just like they did during the pandemic and the Suez Canal crisis,” Sharma added.
“West Asia remains a vital trading partner, particularly for energy. There is an impact, especially on energy-intensive industries, but government support has helped keep cost increases relatively contained,” said Saurabh Sanyal, secretary-general, ASSOCHAM.
A deeper strain beneath the surface
While fuel and freight are the most visible pain points, the more serious cracks are appearing in raw materials and in how they are being priced and supplied.
“Manufacturers are struggling to get the specific grades they need because suppliers are holding back inventory,” said Jayesh Rambhia, Director at the All India Plastics Manufacturers’ Association. Many suppliers, expecting prices to rise further, are choosing to wait.
That hesitation is driving prices up sharply. “Material that used to cost ₹100 is now ₹180 to ₹200, and you have to pay upfront,” Rambhia added. Credit, once a buffer for smaller firms, has largely disappeared.
The result is a severe working capital crunch, particularly for MSMEs. According to Rambhia, more than half the plastics sector has effectively shut down, with the rest operating at just 25–30 per cent capacity. “This isn’t a normal slowdown. It is a structural shock,” he said.
By his estimate, close to a million jobs may already have been affected across India, especially in the plastics sector.
Panic-driven demand
The uncertainty is also changing behaviour across the supply chain.
“We are seeing panic buying. Customers are buying 50 per cent to 100 per cent more than they normally would because they are concerned about a probable shortage. There are increases where there is no clear link to input costs. Some suppliers are simply raising prices,” said Sharma.
Packaging caught in the middle
The impact of war is clearly evident on the packaging sector, as it sits at the intersection of multiple industries.
“Some high-performance grades, especially those used in bottle caps, are in short supply because they depend on imports from West Asia,” said Thimmaiah Napanda P, Managing Director and CEO, Alternicq, a manufacturer of rigid plastic packaging.
He said that not supplying packaging to FMCG or pharma clients creates a much bigger problem downstream. Strong supplier relationships have helped firms like his secure limited materials in a tight market.
Napanda said that resin prices went up as soon as crude prices went — about 2-3 weeks. He added that PET prices were up about 40 per cent, while PP and PE increased by 45–50 per cent. Some of the specialised grades have increased by as much as 70-80 per cent. For now, larger FMCG and pharmaceutical companies are able to absorb this increase, but in the long run, this may not be possible if volatility continues, he said.
Maritime woes
Disruptions in West Asia’s shipping routes are adding another layer of complexity. Sanyal said that diversification is part of the answer. “Expanding exports to Asian and other demand-driven markets can help reduce the impact,” he said.
“If material takes two months to arrive and prices fall in the meantime, the importer takes the loss,” added Rambhia.
The wider impact, beyond factories
What is becoming clear is that the disruption is no longer limited to industries. “Packaging is a vital component in the preservation of food. Without packaging, you begin to see a disruption in the supply chain,” Rambhia added.
Napanda said that this disruption is pushing companies towards scale, reliability and integration. Those who can ensure supply continuity are becoming strategic partners.
MSMEs facing the worst-ever brunt
Industry leaders are demanding that MSMEs be provided with easier access to working capital and a rationalised GST rate.
“With inventory costs being double what they used to be and advance payments becoming the new norm, small players just don’t have the money to cope. Plastic products are currently under an 18 per cent GST, but other alternatives are taxed at a much lower rate. Rationalising that will provide immediate relief, especially when raw materials have gone up exponentially,” said Napanda.
He also argues against the common perception of plastics being unsustainable. “Rigid plastics are recyclable, and in some cases, they even have a lower carbon footprint than materials like glass or ceramics,” he said.
“MSMEs simply don’t have the capacity to stock raw materials in advance, and delivering orders at old prices when costs have doubled is extremely difficult,” Rambhia said.
Even if geopolitical issues abate, a recovery will not be swift. “If the current situation continues, this quarter could be largely washed out. Supply chains are disrupted, exports are impacted, and visibility of demand is limited. It could take a couple of months for supply chains to normalise, and some of the price impacts could linger,” he warned.
The impact is already evident in reduced orders and declining demand.
“This is not a crisis that the industry can solve alone. We need help to make sure that raw materials are available in reasonable supply and that this sector of the economy continues to function. This is an industry whose stability is an economic imperative,” Rambhia added.
While the voices are warning of the sector’s quick comeback from the setback, on the flip side, there is a sense of cautious optimism that these disruptions could lay a foundation for a more resilient future.
Greater localisation, diversified sourcing and stronger domestic capabilities may, over time, reduce dependence on volatile regions. As Napanda puts it, “While it won’t happen overnight, increasing localisation of specialised grades and diversifying sourcing will gradually reduce dependence on West Asia”.
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