The Commerce Department is to hold an inter-ministerial meeting to strategise on dealing with the disruption in India’s international trade caused by the Red Sea situation, official sources said. The attacks have led to a steep increase in the cost of shipping and insurance.
Senior officials from the Ministries of External Affairs (MEA), Shipping and Defence as also the Department of Financial Services (DFS) are expected to participate in the meeting that will look into the problems faced by traders in sending and receiving shipments to and from the key markets of Europe, the US east coast, parts of West Asia and Africa.
They will brain-storm on can be done to minimise the impact, a senior official said.
Meeting next week
“The inter-ministerial meeting tentatively scheduled for next week will look at all problems flagged by the industry, including the increase in shipping and insurance costs, imposition of surcharges by shipping lines, and issues with taking the longer Cape of Good Hope route. Let us see what comes out of it,” the official said.
Ways to increase trade with countries like Australia, with which we already have a free trade pact and which is not affected by the Houthi crisis, will also be explored.
Industry and some research bodies estimate that in the current fiscal itself, India’s exports could be lower by $20-30 billion if the Red Sea crisis continues.
“We will see if the EXIM bank and the ECGC can do something to help exporters meet some of the challenges including meeting higher insurance costs and surcharges,” the official said.
To monitor the volatility in the global economy, the Commerce Department has also set up an departmental strategy group to discuss major developments on a daily basis and analyse if there is need for action, he added. Since November, the Houthi militia have been carrying out attacks on cargo ships in the Red Sea to show support for Palestinians in the on-going Israel-Hamas war. The Red Sea is a critical trade route for India with about $230-240 billion worth of imports and exports shipped through the waters every year.
With big shipping lines like Maersk suspending operations through the route, most consignments arenow being routed via the Cape of Good Hope in South Africa, which is longer by about 14 days.
The Indian Navy has provided escort for some ships along the coastline up to some distance in the Arabian Sea but not beyond, another official added.
“The US-led security coalition that is operating in the Red Sea has provided some support. But the risk is so high that only an estimated 8 per cent of shipments using the route are continuing to do so,” the official said.
