Editor-DN
New Delhi:
As conflict escalates in the Middle East, with Israel vowing to retaliate after Iran’s missile strikes, India Inc. is seeking to create a broader trade blockade along the key Red Sea route.
Industry experts say the dispute could lead to an increase in cargo freight rates because Lebanon’s Iran-backed Hezbollah militia has close ties to the Houthi rebels in Yemen — ships that travel through the Red Sea. Responsible for most attacks on ships. Israel and Iran could seriously disrupt important trade routes for Indian exporters.
The Red Sea crisis began in October last year, when Iran-backed Houthi rebels disrupted trade in the region.
This has affected India’s petroleum exports which fell by 37.56 per cent to $5.96 billion in August this year from $9.54 billion in the same month last year.
According to a recent report by Crisil Ratings, Indian companies use the Red Sea route through the Suez Canal to trade with Europe, North America, North Africa and parts of the Middle East.
The report states that these regions accounted for 50 percent of India’s exports of Rs 18 lakh crore and 30 percent of its imports of Rs 17 lakh crore in FY23. The country’s total merchandise trade (exports and imports combined) was Rs 94 lakh crore in FY23, of which 68 per cent (by value) and 95 per cent (by volume) were shipped by sea.
Attacks on ships in the Red Sea region since November last year have forced companies to seek alternative, longer routes past the Cape of Good Hope.
This has not only increased the delivery time by 15-20 days, but also significantly increased the transit cost due to increased freight rates and insurance premiums, the Crucell report added.
Industry experts say India’s trade with the Middle East remains healthy due to friendly regional players like Saudi Arabia, UAE, Kuwait and Qatar. Bilateral trade between India and Gulf Cooperation Council (GCC) countries reached $162 billion last year.
According to the latest official data, the GCC now accounts for 15 percent of India’s total trade and sectors such as energy, defense, security and health are growing in the region.
Additionally, trade through the Egyptian Suez Canal fell by 50 percent (year-on-year) in the first two months of the year, according to the latest data from the International Monetary Fund (IMF). In FY24, Suez Canal’s annual revenue declined by about 23.4 percent due to the Red Sea crisis. According to Osama Rabi, chairman of the Suez Canal Authority (SCA), “revenues fell to $7.2 billion in the fiscal year 2023/2024, from $9.4 billion a year ago that ended in June”.
According to experts, rising tensions in the Red Sea region are affecting not only the Suez Canal but also the shipping market, trade movements and international supply chains.
On Wednesday, India issued a travel advisory for its citizens, advising them to avoid all non-essential travel to Iran due to heightened tensions in the region.
(Other than the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)
