From leather factories in Uttar Pradesh to migrant-dependent households in Kerala, the economic aftershocks of the regional instability are becoming increasingly visible. Rising shipping costs, weaker overseas demand and uncertainty across Gulf economies are squeezing two of India’s biggest employment lifelines — migrant labour and labour-intensive manufacturing.
For many workers, the impact is deeply personal.
Mohammad Qureshi, 32, had spent years working at a jewellery shop in Saudi Arabia, earning nearly 30,000 rupees monthly — enough to support his family, help fund his sister’s wedding and build a modest home back in India.
Today, he earns barely a fraction of that amount selling tea at his cousin’s roadside stall in Kanpur after the conflict disrupted his plans to return to the Gulf.
“Life in Saudi was easy and the money was good,” Qureshi said while serving customers at the stall. “Life is difficult here. I pray the war ends soon so we can go back.”
India’s economy continues to post strong headline growth figures, expanding at close to 7%, but economists warn that the broader labour market tells a more troubling story. Weak hiring, slowing wages and unstable work conditions are making it harder for millions of young Indians entering the workforce every year.
The strain is especially severe in manufacturing centres like Kanpur, a major hub for India’s leather industry.
At Kings International, a leather factory that exports saddlery and sports equipment to global brands including Decathlon, owner Taj Alam says business confidence has sharply weakened since tensions escalated in the Middle East.
According to Alam, rising fuel and logistics costs linked to the instability around the Strait of Hormuz have squeezed profit margins at a time when global demand is already slowing.
His factory, once operating at full strength with more than 500 workers, is now running at roughly half capacity.
“The outlook will remain bleak until the Strait of Hormuz stabilises,” Alam said. “Why invest when the future looks uncertain?”
Kanpur alone contributes nearly one-quarter of India’s $6 billion leather export industry and supports roughly 500,000 jobs directly and indirectly, according to industry officials. Yet business owners remain hesitant to expand operations or hire additional workers amid global uncertainty.
The pressure is also mounting overseas.
Of the nearly 19 million Indians employed abroad, close to half work in Gulf nations. However, economic growth in the region is now expected to slow sharply, raising fears of layoffs and fewer recruitment opportunities for Indian migrants.
Recruitment agencies say the slowdown became more pronounced after the escalation involving Iran and U.S.-Israeli strikes.
At Hayat Placement Services in Kanpur, recruiter Gautam Bhatnagar described a dramatic decline in overseas placements.
“Earlier, we used to place five to 10 candidates every month,” he explained. “Now we are lucky if we can place even one or two.”
Although there are no official numbers confirming how many Indian workers have permanently left the Gulf, India’s foreign ministry revealed that approximately 1.1 million Indians — including workers, travellers and passengers — returned from the region between late February and the end of April.
The uncertainty is also affecting southern Kerala, a state heavily dependent on Gulf remittances.
Fifty-year-old Thomas Cherian spent nearly two decades working for a construction company in Saudi Arabia before returning to India on leave. He was expected to resume work in March, but his employer suspended projects and reportedly laid off around 600 Indian workers.
Now, he fears his work visa could expire before he gets another opportunity.
“There has been no mass return so far,” said Ajith Kolassery, CEO of NORKA Roots, Kerala’s agency for non-resident affairs. “But if the conflict continues, financial stress in Gulf economies could lead to large-scale repatriation, adding pressure to Kerala’s already strained job market.”
The concerns go beyond remittances and manufacturing.
India already faces the enormous challenge of creating enough jobs for its nearly 400 million young people between the ages of 15 and 29. Experts warn that the combination of geopolitical instability, weak global trade and rapid AI-driven automation is narrowing traditional employment opportunities across multiple sectors.
“This is not just a cyclical slowdown,” said K.E. Raghunathan, chairman of the Association of Indian Entrepreneurs. “AI, weak global trade and tighter migration conditions are narrowing traditional employment avenues across manufacturing, IT and overseas labour.”
Recent labour data shows India’s unemployment rate edged higher in April, while urban youth unemployment remains significantly elevated. Economists also point to rising underemployment, with many graduates forced into low-paying informal jobs that fail to match their qualifications.
According to economist Ram Singh of the Indian Institute of Foreign Trade, the biggest danger may not simply be job losses, but weaker wage growth and deteriorating job quality.
“With a surplus labour market and firms seeking flexibility, this could mean more contractual, gig and informal work,” Singh warned.
As the conflict in the Middle East continues, millions of Indian families dependent on overseas income and export-linked jobs now find themselves caught in an economic uncertainty far beyond their borders.