A prolonged Houthi rebel crisis in the Red Sea has the potential to hurt India’s foreign trade worth an annual $235-240 billion. As shipping and insurance costs escalate, at stake are the exports of numerous items ranging from cars, electronics and machinery to commodities such as premium rice, food products, chemicals and petrochemicals and crude oil imports.

Exports from India could decline by up to $30 billion this fiscal if the crisis in this crucial international trade route does not subside, per initial estimates shared by Delhi-based research body, Research and Information System for Developing Countries. India uses the Red Sea to trade with markets in Europe, east coast of the US, and bordering countries of Africa and Asia. 

Iran-backed Houthis are attacking cargo in the Red Sea to declare their support for Hamas in the Israel conflict. While the conflict has raged, the attacks have intensified and there is uncertainty about when things will normalise.

Official estimate

“The Commerce Ministry, however, has not come up with an official estimate of expected losses as it hasn’t given up hope of an early resolution,” an official source tracking the matter told businessline.

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The world’s shipping giants are mostly waiting to evaluate how dangerous the Houthi threat is

Red Sea strife could rock India

In cases where it makes most sense for our customers, vessels will be rerouted and continue their journey around the Cape of Good Hope, Maersk said in a statement

Maersk to pause all transits through Red Sea

While no relief package is right now under consideration, the government is in close touch with the industry and holding regular stock-taking meetings, the source added.

With shipments using the Red Sea route now going through the Cape of Good Hope in South Africa, which approximately takes 14 more days, shipping costs have sky-rocketed.

“Not only have freight rates doubled, for instance from $700 per container to Saudi Arabia before the crisis to $1500 per container now, all kinds of surcharges are being applied such as peak season surcharge of $1500 and Red Sea/contingency surcharge of $1500-$3000,” said Ajay Sahai from FIEO. Marine insurance costs, too, are on the rise, he added. “Every year India exports about $105 billion worth of goods and imports around $130 billion through the Red Sea. How much of that would get affected depends on when the situation improves,” Sahai said.

Imports, including that of crude oil, into India is also likely to be affected if the Houthis continue their attacks. “India has stocks for around another month so right now there is no problem. But a prolonged crisis in the Red Sea could change that,” the source said.