West Asia Conflict Could Push 2.5 Million Indians into Poverty: UNDP Report

The ongoing military escalation in West Asia is emerging as a significant economic risk for countries across Asia-Pacific, with India among the most vulnerable. According to a report by the United Nations Development Programme (UNDP), the conflict could push up to 2.5 million people in India into poverty, while also slowing the country’s human development progress.

UNDP Report Highlights Growing Regional Impact

Rising Economic Pressures Across Asia-Pacific

In its report titled ‘Military Escalation In The Middle East: Human Development Impacts Across Asia And The Pacific’, the UNDP noted that the crisis is already having far-reaching consequences.

The report stated that the conflict is “widening human development pressures across Asia and the Pacific. Through higher fuel, freight, and input costs, the shock is diminishing household purchasing power, raising food insecurity, straining public budgets, and weakening livelihoods.”

These pressures are being felt across economies that are heavily dependent on energy imports, trade routes, and remittances linked to the Gulf region.

Global Poverty Impact

The United Nations Development Programme UNDP’s preliminary estimates suggest that the effects of the conflict could push approximately 8.8 million people worldwide into poverty. The broader economic cost to the Asia-Pacific region could reach up to $299 billion, reflecting disruptions in trade, energy markets, and supply chains.

India Faces Significant Poverty Risks

Sharp Increase in Poverty Levels

The report highlights a concerning rise in poverty levels in India. It estimates that the number of people pushed into poverty could increase from around 400,000 to 2.5 million.

Under a severe scenario—based on a 28-day conflict with an 8-month economic adjustment period—India’s poverty rate could rise from 23.9% to 24.2%, adding 2,464,698 people to the poverty count.

This would increase the total number of people living in poverty in India to approximately 354,033,698, compared to 351,569,000 before the crisis.

South Asia Most Affected

The report indicates that South Asia is expected to bear the largest burden globally, with poverty increases ranging from about 1.7 million to over 8 million people. This reflects both the region’s large population and its vulnerability to rising prices and income shocks.

Impact on Human Development Index (HDI)

Setback in Development Progress

The UNDP also assessed the impact on the Human Development Index (HDI), a key indicator measuring health, education, and income.

It noted that Iran could experience a decline equivalent to one to one and a half years of human development progress. For India, the report stated, “India is projected to experience a loss of approximately 0.03–0.12 years of HDI progress, followed by Nepal at around 0.02–0.09 years and Viet Nam at 0.02–0.07 years, while for China, the estimated effects on HDI remain limited in magnitude, ranging roughly 0.01–0.05 years,” it said.

Energy Dependence Amplifies Vulnerability

Heavy Reliance on West Asia

India’s strong dependence on West Asia for energy imports makes it particularly susceptible to disruptions caused by the conflict.

• Over 90% of India’s oil needs are met through imports
• More than 40% of crude oil imports come from West Asia
• Around 90% of LPG imports are sourced from the region

Additionally, over 45% of India’s fertiliser imports come from West Asian countries, and 85% of domestic urea production depends on imported regasified liquefied natural gas.

Supply Chain Disruptions

Any disruption in key shipping routes such as the Strait of Hormuz can significantly increase costs for energy, fertilisers, and industrial inputs, thereby impacting multiple sectors of the economy.

Impact on Employment and MSMEs

Informal Sector at Risk

The report underscores the vulnerability of India’s labour market, where nearly 90 per cent of employment is informal.

“In India, employment risks are likely to be especially pronounced in MSME-intensive sectors that rely on imported energy and inputs or are exposed to Gulf-linked trade. This is particularly significant in a labour market where about 90 per cent of employment is informal.”

MSMEs Face Multiple Challenges

“Small firms in hospitality, food processing, construction materials, steel-based manufacturing, and gems and diamonds may face higher input costs, supply shortages, and delayed or cancelled orders, with knock-on effects on jobs, hours worked and business continuity. These pressures could translate into reduced working hours, job losses and business interruptions, especially for informal and migrant workers and MSMEs operating with limited financial buffers and constrained access to credit,” it said.

Remittances and Migrant Workers

High Exposure to Gulf Economies

India’s large migrant population in Gulf countries further increases its exposure to the crisis.

“For several countries, the scale of direct exposure to Gulf labour markets and remittance flows is both substantial and consequential,” the report said. “India has the largest absolute exposure,” it said, citing data from the Ministry of External Affairs that 9.37 million Indians were living in Gulf Cooperation Council countries as of October 2024, contributing about 38-40% of India’s inward remittances.

Rising Costs in Healthcare Sector

Medical Supplies Become Costlier

The conflict is also affecting India’s healthcare sector. Raw material costs for medical devices are expected to rise by around 50 per cent due to disruptions in key trade routes, while wholesale medicine prices have already increased by 10-15%.

Opportunities Amid Crisis

Despite the challenges, the UNDP highlighted potential long-term opportunities.

“At the same time, we see important opportunities for countries to accelerate longterm resilience through adaptive social protection, stronger local and regional value chains, and diversified energy and food systems,” said UN Assistant Secretary General and UNDP Regional Director for Asia and the Pacific Kanni Wignaraja.

Conclusion

The UNDP report paints a stark picture of the economic and social risks posed by the West Asia conflict, particularly for India. With millions at risk of falling into poverty, rising inflation, and disruptions across key sectors, the crisis could slow the country’s development trajectory. However, it also underscores the urgent need for policy reforms, economic diversification, and stronger social safety nets. As global uncertainties persist, building resilience will be critical to safeguarding livelihoods and sustaining long-term growth.