The ongoing crisis in the Red Sea region is beginning to affect India’s exports. A senior official has revealed that the costs of shipping and insuring goods to destinations in the EU, the East Coast of the US, parts of Africa, and the Middle East have significantly increased.
The government is yet to decide on whether to offer support to exporters in the form of subsidies, rebates, or higher incentives under existing schemes. Both shipping and insurance costs had increased due to the ongoing conflict caused by the Iran-backed Houthi rebel group attacking cargo in the Red Sea, which started after the Israel-Hamas war in October. The Houthi rebels did this to show their support for Hamas.
The Defence Ministry has been providing security and escorts to some shipments, but the number of exporters using the Red Sea route has decreased due to the risk of attacks and high insurance costs. Instead, most exporters are using the alternative route through the Cape of Good Hope, which is a much longer route. As a result, turnaround time has increased by about 14 days. Although there is no container shortage yet, both shipping costs and insurance costs have increased sharply. The government will estimate the costs once the numbers are provided by the industry.
According to industry estimates, India’s exports worth around $225-230 billion to the EU, the east coast of the US, African countries such as Egypt, Eritrea, and Djibouti, and some Middle Eastern countries could be at risk if the situation in the Red Sea is not contained.