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In the wake of escalating threats to cargo ships navigating the Red Sea, India faces a potential downturn in exports, signaling a looming economic impact. Recent incidents involving Houthi militants targeting vessels passing through the Red Sea have raised concerns among exporters, prompting a cautious approach.
Experts estimate a significant drop in Indian exports by approximately $30 billion, potentially marking a 6-7% decrease from the previous year’s total of $451 billion. The Research and Information System for Developing Countries, a New Delhi-based think tank, highlighted the looming crisis, emphasizing the potential contraction in India’s trade.
Sachin Chaturvedi, Director General of the think tank, expressed apprehension, stating, “The crisis in the Red Sea would indeed impact India’s trade and may lead to further contraction.” Despite these concerns, the government has not yet released official estimates regarding the potential export losses due to the Red Sea crisis.
Reports indicate a substantial decline in vessel traffic through the Suez Canal, with a 44% drop compared to the average for the first half of December 2023. This decline reflects growing apprehension and caution among shippers navigating the region.
The Red Sea serves as a critical export route for India, facilitating shipments to Europe, the US East Coast, the Middle East, and African countries. The Modi government has initiated discussions with export commission councils to ensure the safety of export vessels traversing this route.
The conflict backdrop involves Yemen’s Iran-backed Houthi militants targeting Red Sea vessels with missiles, particularly those believed to have connections with Israel. Recent events, including the reported hijacking of a Liberian-flagged vessel near Somalia’s coast, have intensified fears among Indian exporters.
Ajay Sahai, Director General of the Federation of Indian Export Organizations, noted that these rising threats have prompted a cautious approach among Indian exporters, leading to the withholding of around 25% of cargo ships passing through the Red Sea.
India’s export spectrum encompasses various goods like petroleum products, cereals, and chemicals, predominantly reliant on the Red Sea route. However, this fiscal year has already seen a 6.5% contraction in exports from April to November compared to the previous year, according to government data.
In response to these mounting concerns, the Indian Navy’s recent successful rescue mission of a hijacked vessel in the Arabian Sea aims to alleviate fears but underscores the volatile conditions surrounding export cargo ships.
With the Red Sea’s significance as a pivotal trade route for India and the ongoing threats impacting vessel movements, stakeholders are closely monitoring developments, seeking measures to safeguard the nation’s export interests amidst escalating regional tensions.
Sources By Agencies
