India’s trade remains unaffected by the Red Sea crisis
Published on: February 11, 2024.
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There has been no adverse impact on India’s exports and imports thus far due to the Red Sea crisis, according to an official. While the transportation cost has increased as shippers take longer routes, there has been no negative effect on trade volume. However, exporters remain concerned about the significant jump in freight costs and its potential impact on India’s exports.
The commerce ministry will release trade data for January on February 15. In December of last year, exports grew slightly by one percent, reaching USD 38.45 billion. The attacks by Yemen-based Houthi rebels on commercial ships in the Red Sea have disrupted global supply chains, forcing vessels to take longer routes for imports and exports.
This has resulted in increased freight costs, mandatory war risk insurance, and significant delays. Basmati rice exporters, for example, are facing a 233 percent increase in freight costs, reaching USD 2,000 per 20-tonne container for destinations around the Red Sea.
The strait of Bab al-Mandab, a crucial shipping route connecting the Mediterranean Sea to the Indian Ocean, has been targeted by Houthi rebels using drones and rockets. With 30 percent of global container traffic passing through this strait, tensions and incidents have increased, necessitating diversification of trade routes for Indian exporters.
To avoid attacks, most large shipping firms have stopped using the Bab al-Mandab strait since December 15, 2023. Instead, ships destined for Europe will now travel via a longer route around the Cape of Good Hope at the bottom tip of Africa. While this increases voyage distances by 40 percent and raises transportation time and cost, it ensures the safety of the trade link between Europe, India, and Asia.
The preferred shipping route from India to Europe is typically through the Bab-el-Mandeb Strait, Suez Canal, and Red Sea due to its shorter and faster journey. However, the Cape of Good Hope route is used for bulk cargo shipments when time is less critical or when there are concerns about political instability in the Middle East.
India heavily relies on the strait of Bab al-Mandab for its crude oil and LNG imports, as well as trade with the Middle East, Africa, and Europe. Despite the challenges posed by the Red Sea crisis, Indian exporters and importers continue to navigate these obstacles and maintain their trade relationships.
Source: Indian Express
