Crisis can impact India as 80% of exports to Europe takes place via Red Sea: Official

Crisis can impact India as 80% of exports to Europe takes place via Red Sea: Official

Subject: Economy

Section: External Sector

Details

According to the commerce and industry ministry, the Red Sea shipping crisis could impact India’s exports to Europe the most as about 80 per cent of the outbound shipments to Europe takes place through the Red Sea region. The EU contributes to over 15 per cent of India’s total goods exports.

Other reasons for slowdown in exports to Europe

• Russia-Ukraine war
• Environmental related trade measures such as the carbon border adjustment mechanism and EU’s deforestation law are feared to hit India’s exports going forward.

Impact of Red Sea disruption

• The cost is increasing due to the Red Sea disruption. But ultimately it will depend on demand. The US exports are also through the Suez route. Transport charges are surging. An additional congestion surcharge is also being charged. But if the demand is robust the shipments will go.
• The ministry said that the Red Sea region is vital for 30 per cent of global container traffic and 12 per cent of global trade and about 95 per cent of vessels have rerouted around the Cape of Good Hope, adding 4000 to 6000 nautical miles and 14 to 20 days to journeys.

Measures

• The union government is also mulling on using alternate trade routes and has asked Export Credit Guarantee Corporation (ECGC) not to raise insurance premiums amid rising cost of shipping to Europe.