India May Face Potential $30 Billion Export Drop Amidst Escalating Threats on Red Sea Shipping

In the wake of increasing threats to cargo vessels in the Red Sea, India is bracing for a substantial impact on its exports, with potential losses estimated at around $30 billion. Recent incidents have heightened concerns, leading exporters to hold back shipments due to escalating fears.

Last year's export figures amounted to approximately $451 billion, and an initial assessment by the Research and Information System for Developing Countries, a New Delhi-based think tank, suggests a potential 6-7% decline in the face of mounting concerns about cargo ship safety in the Red Sea.

Sachin Chaturvedi, the director general of the think tank, cautioned, "The crisis in the Red Sea would indeed impact India’s trade and may lead to further contraction." Despite this, the government has not provided official estimates of export losses attributable to the Red Sea crisis.

With the threats on the Red Sea escalating, the number of vessels transiting through the Suez Canal has seen a sharp decline of 44%, compared to the average for the first half of December 2023, according to Clarkson Research Services Ltd, a unit of the world’s largest ship broker.

The Red Sea serves as a vital export route for India, facilitating shipping to Europe, the US East Coast, the Middle East, and African countries. In response to the heightened risks, the Modi government is engaging in discussions with export commission councils to ensure the safe passage of export vessels.

Amid the ongoing conflict between Israel and Hamas, Yemen’s Iran-backed Houthi militants have targeted vessels passing through the Red Sea with missiles in recent weeks, citing connections with Israel as a motive.

Last week, India deployed a warship to the Arabian Sea following reports of a Liberian-flagged vessel being hijacked near Somalia’s coast. The Indian Navy successfully rescued the ship, but the incident has sparked significant concerns among Indian exporters.

According to Ajay Sahai, director general of the Federation of Indian Export Organizations, the rising threats have prompted Indian exporters to withhold around 25% of their cargo ships navigating through the Red Sea. India's exports, encompassing petroleum products, cereals, and chemicals, are already facing a 6.5% contraction in the current fiscal year from the same period last year, according to government data.