Hundreds of thousands of Indian workers leave factories as auto and textile production stalls.

Factories in India’s textile and automotive manufacturing hubs are slowing production as living gas costs rise amid the Iran conflict, driving migrant workers to leave plants due to reduced economic viability. Labor shortages—estimated in the hundreds of thousands—are increasing production costs, particularly for micro, small and medium-sized enterprises (MSMEs), which account for about 30% of GDP and nearly 46% of exports.

Worker departures and output cuts

In Surat, India’s textile hub with more than 35,000 facilities, about 250,000 workers have left since early March, out of roughly 1 million workers in the city, according to the South Gujarat Chamber of Commerce and Industry. About 30% of plants have cut output.

Lalit Jha, manager at Niharika Dyeing and Printing Mills, said the firm provided food support but workers still left. He added that if gas shortages persist, workers would prefer to return home to be with their families.

Similar patterns are appearing elsewhere. In the Bahadurgarh footwear cluster in northern India, nearly 40% of the 450,000 workers have left. Plants in Chennai and Bengaluru—where Hyundai, TVS Motor and Nissan have facilities—have also reported shortages of around 100,000 workers.

Why savings are shrinking

Sachin Chhabra, founder of migrant worker support NGO Nia.one, said that previously, monthly income of 15,000–20,000 rupees allowed workers to save about 8,000 rupees for remittances. Rising living costs, especially gas, have reduced those savings. He said workers are less willing to leave their families when they cannot save.

MSMEs under strain from thin margins

The departures highlight the vulnerability of MSMEs that depend on migrant labor and operate with thin margins and limited working capital. These firms often buy inputs on a just-in-time basis, making them sensitive to price spikes and supply disruptions.

Chhabra added that some manufacturers have orders for thousands of products but cannot fulfill them.

Energy disruption and rising input costs

Even if there is a ceasefire, the Middle East conflict remains unresolved and the U.S. blockade of Hormuz continues, while Iran has threatened Gulf ports. Totla said the sooner the conflict ends, the faster workers will return.

The Hormuz Strait, which handles about 20% of global oil and gas shipments, has been nearly disrupted since late February, affecting gas supply to India. While the government says there is no fuel shortage for households, business associations say supply is tight and prices have risen 3 to 4 times.

Input costs are also climbing. Dye chemicals and industrial chemicals have increased by as much as 50% in some plants within a single month.

Footwear supply-chain pressure

The footwear sector faces additional pressure due to reliance on PVC plastics, EVA materials, and imported petrochemical inputs. India imports about 45% of intermediate petrochemical inputs, with PVC and EVA dependence above 60%, and acids such as acetic and formic acids up to 80%.

Even if supplies recover, it may take two months for the input supply chain to normalize, as materials must be processed in hubs such as China and South Korea before export to India.

Noushad said production has fallen almost everywhere during the pre-summer peak period for lightly built, breathable footwear. He estimated it would take about 45 days for workers to return if the ceasefire persists, noting that firms would need to deploy people and arrange transport.

Wider impact across the value chain

As costs rise, remaining workers face risks of job losses. The plastics industry has started cutting jobs as many plants reduce output. Polymer prices jumped by up to 70%, making it harder for firms to maintain prior input purchasing levels.

One industry participant said manufacturers struggle to forecast prices: they may take orders at high prices, but input costs rise further when purchases are made. They cited a scenario where orders were taken at prices 1.5 times higher, while input costs increased to 1.75 times.

The pressure is spreading across the value chain—from consumers to producers and energy market participants—leaving the system under stress.