Import/Export | Insurance | News & Insights

Red Sea Crisis Takes Toll on Indian Exports: Shipping and Insurance Costs Surge

Published: January 8, 2024

The Red Sea crisis has begun to impact India’s export sector, leading to a rise in shipping and insurance costs for shipments to the European Union (EU), the east coast of the United States (US), parts of Africa, and the Middle East. A senior government official stated that these escalating costs are becoming a burden for exporters.

However, the government has not yet decided whether to provide support to exporters through subsidies, rebates, or higher incentives under existing schemes. This issue was addressed during a stock-taking meeting held by the Commerce Secretary, which involved traders, shippers, and other stakeholders.

The crisis in the Red Sea arose after the Iran-backed rebel group, Houthi, started attacking cargo in support of Hamas during the Israel-Hamas conflict in October. This situation has not only raised concerns about the risk of attacks but also caused insurance costs to skyrocket. As a result, the number of exporters using the Red Sea route has significantly decreased.

Most exporters have resorted to using the longer alternative route through the Cape of Good Hope, which has led to an increase in turnaround times by approximately 14 days. While there is currently no shortage of containers, shipping costs, and insurance costs have surged. The government plans to estimate the extent of the impact once industry figures are provided.

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 nations could be at risk if the Red Sea situation remains unresolved. The government is closely monitoring the crisis and considering potential measures to support affected exporters.

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