The costly detour for shipping lines away from Red Sea has set the freight rates soaring. India is mulling a variety of measures, including subsidisations for Indian exporters to offset higher shipping costs and insurance premiums. New Delhi is also in touch with the US-led multi-nation coalition to ensure the safe passage of commercial vessels in the Red Sea.
“Indian exports are getting impacted, and there are concerns that agricultural commodities may see a fall in exports, because it goes to Europe through the Red Sea route. The government is mulling measures, either via the US-led coalition, or by subsidising Indian exporters so that the cost does not go up for them,” the official added.
Limiting the impact on agricultural exports is crucial for India as it directly affects farm income. India’s agricultural exports to Europe stood at $2.28 billion in April-November 2023, mostly comprising fruits, vegetables, coffee, and rice, according to data from commerce ministry’s NIRYAT portal.
India’s exports to Europe through the Suez Canal (in the Red Sea) includes food products, apparel, and electronics, among others, and its imports include crude oil. In FY2023, India’s overall merchandise trade (exports and imports) with Europe and North Africa were worth $106 billion and $98 billion, respectively. Approximately 50 percent of these imports and 60 percent of exports, totalling $113 billion, may have been through the Suez Canal.
India’s shipments, like low-end engineering products, steel, and commodities such as rice and garments, stand to be affected by the crisis unfolding in the Suez Canal.
The government official cited above added that India’s commerce ministry has been in touch with exporters, who have raised concerns about rising shipping costs. Their concerns have been communicated to the finance ministry as well. Indian exporters are worried over a rise in shipping costs as attacks on commercial vessels taking the Red Sea route continue, forcing freight companies to opt for the longer route around Africa to reach the west or wait at nearby ports to ensure safe passage though the Suez Canal.
