ABSTRACTThe paper analyses the impact of the Gulf crisis on the Indian economy as a whole, on the state of Kerala which was the origin of the majority of the Indian migrants in Kuwait and Iraq, and on the returning migrants them‐ selves. The scale of the disturbances is estimated both with respect to the labour market, as well as the flow of remittances. Alternative policy responses are discussed, especially in the context of the Kerala economy, and the problem is viewed separately from the vantage point of the returning migrants, as well as that of the State Government. The effects of the crisis become more acute as the focus shifts from the level of the macroeconomy, to the state of Kerala, to the migrants themselve