US sanctions on Iran: Basmati demand stays strong, pharma and livestock exporters face new hurdles

Tougher US sanctions on Iran are raising fresh concerns for Indian exporters, but for the country’s basmati rice industry, the immediate risk is not a collapse in Iranian demand. Instead, exporters are increasingly worried about whether they can continue to move cargo, ensure shipments, and receive payments smoothly as sanctions tighten and established trade channels come under pressure.

In recent years, bilateral trade between India and Iran has contracted sharply. According to government data, bilateral merchandise trade between India and Iran declined from $17.03 billion in 2018-19 to $4.77 billion the following year and has since dropped to just $1.63 billion in 2025-26—a decline of about 90%. In the latest year, India exported goods worth $1.25 billion to Iran while imports stood at $0.37 billion, leaving India with a trade surplus of about $880 million, according to the Embassy of India in Tehran.

Rice, however, remains a significant part of the remaining trade. India exported rice worth about $810 million to Iran in 2025-26, accounting for nearly two-thirds of its total exports to Iran. Although shipments in April-June were down sharply from a year earlier, India exported $383.11 million worth of rice to Iran in the first half 2026.


Against that backdrop, the immediate concern for the basmati industry is not whether Iranian buyers still want Indian rice, but whether exporters can continue to serve that demand as shipping, insurance, and payment channels come under pressure.

“The immediate impact is more on shipping, insurance, and payment mechanisms than on demand,” Ajay Bhalotia, General Secretary, All India Rice Exporters’ Association, told The Economic Times Digital.

Bhalotia said that the latest US sanctions and disruptions around the Strait of Hormuz have made transportation more difficult and expensive. Payment channels have also emerged as a concern, particularly transactions routed through the UAE and Dubai, which have traditionally been important hubs for India-Iran trade, he added.

The pressure on these payment and trade channels comes at a sensitive time for the basmati industry. According to Bhalotia, demand from Iran has increased significantly after the US-Iran conflict, while basmati prices in India have already risen by around 25%.

Iranian demand for basmati stays firm

Indian basmati’s established market position gives exporters some confidence that Iranian buyers will continue sourcing substantial quantities from India. “I expect Iran to continue sourcing substantial quantities of rice from India because Indian basmati has an established market, strong consumer acceptance, and a well-developed supply chain in Iran,” Bhalotia said.

Bhalotia highlighted that the rice’s status as an essential food product gives Iranian buyers a strong incentive to keep supply lines open. However, the market is not insulated from sanctions-related disruption. “If sanctions become more stringent and shipping, insurance, or payment channels remain disrupted for a prolonged period, Iranian buyers will naturally explore alternative suppliers and routes,” he said.

However, this does not necessarily mean India will lose the market, but it could lead to some diversification of sourcing, he said. “If Iranian demand remains strong during this period, the availability situation could become even tighter, and prices could remain firm,” Bhalotia said.

The exporting community’s challenge is also being compounded by disruption in established trade and payment routes. The latest US sanctions have added another layer of uncertainty by increasing pressure on business entities and financial institutions dealing with Iran. The UAE’s decision to suspend Iran-related trade and financial activity has also raised concerns among Indian exporters because Dubai has long served as an important intermediary for India-Iran commerce.

Livestock trade faces logistics pressure

A similar concern is emerging in India’s livestock and animal-protein exports. “The immediate impact on India's livestock and animal-protein exports to Iran appears manageable, although the operating environment has become more complex,” said Divya Kumar Gulati, Chairman of the Compound Livestock Feed Manufacturers Association (CLFMA) of India. Iran remains an important market for several Indian agricultural and food products, according to the apex industry association representing the livestock and dairy sectors. The current trade restrictions are more likely to affect the cost and ease of doing business than underlying demand, Gulati said.

From a demand perspective, food and essential agricultural commodities tend to remain relatively resilient because they are linked to food-security requirements. According to Gulati, the bigger concern is logistics. The tightening of sanctions, coupled with disruptions around the Gulf and changes in established regional trade channels, could result in longer transit times, fewer shipping options, and higher freight costs, he said.

War-risk premiums and insurance costs have also increased, as shipping through the region has become more challenging, according to feedback received by CLFMA from its members.

Amid increased US pressure on Iran, payment channels have emerged as another area requiring close monitoring. With conventional banking channels becoming more cautious, exporters and importers may have to rely on alternative, compliant payment arrangements and routes, Gulati said.

The industry has demonstrated its ability to adapt by developing payment networks through markets, including the UAE, Germany, China and Turkey, he said, adding that any prolonged disruption to established UAE-linked channels, however, could increase transaction time and costs.

“For the livestock sector, therefore, the key issue is not necessarily a collapse in Iranian demand, but whether shipping, insurance and payment costs can be contained sufficiently to keep exports commercially viable,” Gulati said. Iran's requirement for affordable sources of protein and food products is structural rather than purely cyclical, he added.

Pharma’s bigger concern is Afghanistan

The country’s pharmaceutical sector presents a different picture. Direct exposure of Indian pharma exporters to Iran has been quite limited for some time. However, Iran’s sanctions status has kept most Indian banks cautious about such trade, limiting the channels available to process related payments, said Saurabh Agarwal, Director and chief executive of HAB Pharmaceuticals and Research.

The latest round of sanctions is, therefore, unlikely to materially disrupt shipments or new orders for most pharmaceutical exporters, simply because volumes into Iran were already thin, according to Agarwal.

The pharma industry is also not seeing a significant rush by Iranian buyers to build inventories, Agarwal said, adding that demand from the Iranian market has remained muted rather than spiking in response to the latest sanctions.

Agarwal said the shift was more structural than reactive, with Indian suppliers proactively reducing their exposure to Iran while Iranian buyers increasingly sourcing from neighbouring countries. However, the more significant impact on Indian pharmaceutical exporters may be outside Iran. “The more material story for Indian pharma exporters right now may be Afghanistan rather than Iran directly,” Agarwal said.

According to him, over 75% of India’s pharmaceutical exports to Afghanistan traditionally pass through Iran’s Bandar Abbas port. That corridor has been effectively stalled since the conflict began, while the alternative Pakistan land route stopped functioning last year.

He further mentioned that exporters are now looking for workarounds through air freight and Turkey. The combination of disruption around Bandar Abbas and the closed Pakistan land route has had a greater impact on the landlocked and trade-dependent market than on Iran itself, where Indian pharma exposure was already minimal before the conflict, he said.


On Mon, Sep 7, 2026 at 11:38 AM Shariq Khan <shariq.khan@timesinternet.in> wrote:


Iran sanctions: Basmati demand stays strong, pharma and livestock exporters face new hurdlesIndian basmati demand holds firm as Iran sanctions test pharma, livestock trade
Synopsis: Iranian demand for Indian basmati remains resilient despite tougher US sanctions, but exporters are facing rising shipping, insurance and payment risks. Pharma and livestock exporters are also navigating disruptions to established trade routes.

Tougher US sanctions on Iran are raising fresh concerns for Indian exporters, but for the country's basmati rice industry, the immediate risk is not a collapse in Iranian demand. Instead, exporters are increasingly worried about whether they can continue to move cargo, insure shipments and receive payments smoothly as sanctions tighten and established trade channels come under pressure.
Official trade data show how steep the contraction in bilateral trade has been. Bilateral merchandise trade between India and Iran stood at $17.03 billion in FY2018-19, fell to $4.77 billion the next year and has since slid to just $1.63 billion in FY2025-26—a decline of about 90%. In the latest year, India’s exports to Iran stood at $1.25 billion, against imports of $0.37 billion, leaving India with a trade surplus of about $880 million, according to the Embassy of India in Tehran.
Rice, however, remains a significant part of the remaining trade. Rice exports to Iran were worth about $810 million in FY2025-26, accounting for nearly two-thirds of India’s exports to the country. More recent data point to some stress: India exported $383.11 million worth of rice to Iran in the first half of calendar 2026, although shipments in April-June were down sharply from a year earlier.
Against that backdrop, the immediate concern for the basmati industry is not whether Iranian buyers still want Indian rice, but whether exporters can continue to serve that demand as shipping, insurance and payment channels come under pressure.
“The immediate impact is more on shipping, insurance and payment mechanisms than on demand,” Ajay Bhalotia, general secretary of the All India Rice Exporters Association, told The Economic Times Digital. Bhalotia, however, added that the latest US sanctions and disruptions around the Strait of Hormuz have made transportation more difficult and expensive. Payment channels have also emerged as a concern, particularly transactions routed through the UAE and Dubai, which have traditionally been important hubs for India-Iran trade, Bhalotia said.
The pressure on these payment and trade channels comes at a sensitive time for the basmati industry. According to Bhalotia, demand from Iran has increased significantly after the US-Iran conflict, while basmati prices in India have already risen by around 25%.
Iranian demand stays firmIndian basmati's established market position gives exporters some confidence that Iranian buyers will continue sourcing substantial quantities from India. “I expect Iran to continue sourcing substantial quantities of rice from India because Indian basmati has an established market, strong consumer acceptance and a well-developed supply chain in Iran,” Bhalotia said.
Bhalotia highlighted that the rice's status as an essential food product gives Iranian buyers a strong incentive to keep supply lines open. However, the market is not insulated from sanctions-related disruption. “If sanctions become more stringent and shipping, insurance or payment channels remain disrupted for a prolonged period, Iranian buyers will naturally explore alternative suppliers and routes,” he said. He added that this does not necessarily mean India will lose the market, but it could lead to some diversification of sourcing. “If Iranian demand remains strong during this period, the availability situation could become even tighter, and prices could remain firm,” Bhalotia said.
The exporting community’s challenge is also being compounded by disruption to established trade and payment routes. The latest US sanctions have added another layer of uncertainty by increasing pressure on business entities and financial institutions dealing with Iran. The UAE's decision to suspend Iran-related trade and financial activity has also raised concerns among Indian exporters because Dubai has long served as an important intermediary for India-Iran commerce.

Livestock trade faces logistics pressureA similar concern is visible in India's livestock and animal-protein exports. “The immediate impact on India's livestock and animal-protein exports to Iran appears manageable, although the operating environment has become more complex,” said Divya Kumar Gulati, Chairman of the Compound Livestock Feed Manufacturers Association (CLFMA) of India. For the country’s apex industry association representing the livestock and dairy sectors, Iran remains an important market for several Indian agricultural and food products, and current trade restrictions are more likely to affect the cost and ease of doing business than underlying demand.
From a demand perspective, food and essential agricultural commodities tend to remain relatively resilient because they are linked to food-security requirements. According to Gulati, the bigger concern is logistics. The tightening of sanctions, coupled with disruptions around the Gulf and changes in established regional trade channels, could result in longer transit times, fewer shipping options and higher freight costs, he said.
War-risk premiums and insurance costs have also increased as shipping through the region has become more challenging, according to feedback received by CLFMA from its members.
Amid increased US pressure on Iran, payment channels have emerged as another area requiring close monitoring. With conventional banking channels becoming more cautious, exporters and importers may have to rely on alternative, compliant payment arrangements and routes, Gulati said. He added that the industry has demonstrated its ability to adapt by developing payment networks through markets including the UAE, Germany, China and Turkey. But any prolonged disruption to established UAE-linked channels could increase transaction time and costs. “For the livestock sector, therefore, the key issue is not necessarily a collapse in Iranian demand, but whether shipping, insurance and payment costs can be contained sufficiently to keep exports commercially viable,” Gulati said. Iran's requirement for affordable sources of protein and food products is structural rather than purely cyclical, he added.
Pharma's bigger concern is AfghanistanThe country’s pharmaceutical sector presents a different picture.
Saurabh Agarwal, director and chief executive of HAB Pharmaceuticals and Research, said direct exposure of Indian pharma exporters to Iran has actually been quite limited for some time. Iran's sanctions status has kept most Indian banks cautious about such trade, limiting the channels available to process related payments, he added.
The latest round of sanctions is therefore unlikely to materially disrupt shipments or new orders for most pharmaceutical exporters, simply because volumes into Iran were already thin, according to Agarwal.The pharma industry is also not seeing a significant rush by Iranian buyers to build inventories, Agarwal said, adding that demand from the Iranian market has remained muted rather than spiking in response to the latest sanctions.
Agarwal said the shift was more structural than reactive, with Indian suppliers proactively reducing their exposure to Iran while Iranian buyers increasingly sourcing from neighbouring countries. However, the more significant impact on Indian pharmaceutical exporters may be outside Iran. “The more material story for Indian pharma exporters right now may be Afghanistan rather than Iran directly,” Agarwal said. According to him, over 75% of India's pharmaceutical exports to Afghanistan traditionally route through Iran's Bandar Abbas port. That corridor has been effectively stalled since the conflict began, while the alternative Pakistan land route stopped functioning last year.
He further mentioned that exporters are now looking for workarounds through air freight and Turkey. The combination of disruption around Bandar Abbas and the closed Pakistan land route has had a greater impact on the landlocked and trade-dependent market than on Iran itself, where Indian pharma exposure was already minimal before the conflict, he said.