Indian exporters of rice and marine products are most adversely affected by the strife in the Red Sea, while a prolonged crisis on the key shipping route can affect the profitability and working capital cycle of export-oriented industries and trigger supply chain issues that could renew inflationary pressures.
Companies typically use the Red Sea route through the Suez Canal to trade with Europe, North America, North Africa and part of the middle-east—regions that accounted for almost half of India’s exports and 30% of imports in 2022-23.
Around 95% of India’s goods trade volumes are shipped through sea.
Increasing attacks on ships sailing in the Red Sea region have persuaded shippers to consider the alternative, longer route past the Cape of Good Hope, increasing transit costs.
On the import front, the impact is expected to be limited for import-dependent sectors like non-urea fertilisers at this point, but a sustained uptick in sourcing costs would need higher subsidy payments from the government.
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