The Ministry of Commerce has directed the Department of Financial Services (DFS), under the Ministry of Finance, to ensure a continuous credit flow to exporters following disruptions in the Red Sea shipping route. An inter-ministerial meeting, chaired by Union Commerce Secretary Sunil Barthwal, brought together officials from the Ministry of External Affairs, Defence, Shipping, and DFS to address the situation on Wednesday.
The concern arises in response to the recent military strikes launched by the United States and the United Kingdom in Yemen following Houthi rebel attacks on shipping in the Red Sea. With over 80% of exports bound for Europe potentially impacted, the ministry emphasised the need to monitor the issue closely.
While major ports remain unaffected, the alternative route via the Cape of Good Hope has led to increased time and cost for shipments. The heightened security tension in the Red Sea region has caused freight rates to double while fears of further disruptions persist. Consequently, consignments have been delayed by two to three weeks, impacting the sailing of ships.
Indian exports of low-value goods, particularly textiles and agricultural products, are expected to be primarily affected. In response, the Commerce Ministry had previously urged the Export Credit Guarantee Corporation (ECGC) to refrain from raising insurance premiums due to the escalating shipping costs to Europe.
As the situation continues to unfold, maintaining the credit flow to exporters seems to be the government’s priority to mitigate the impact on Indian trade.
