Indian trade has not experienced any major impact from the Red Sea crisis, but it would likely absorb some impact in January, the Ministry of Commerce said on Monday.
The country's trade deficit has narrowed to $19.8 billion in December in comparison with $20.6 billion in the previous month.
The ministry highlighted that there was no stress on container availability as additional fleets had been roped in to ensure they keep up with the revised schedules. However, officials said the combined impact of higher freight costs, insurance premium and longer transit times could make imported goods significantly more expensive.
"The export promotion council has indicated to us that exporters are withholding consignments because of increased freight charges and surcharges imposed by shipping lines," Commerce Secretary Sunil Barthwal said, at a press conference in New Delhi.
"India is beating the global trends in trade. And we expect higher volumes of exports in the last quarter of the current fiscal," Barthwal said.
The sailing of most of the ships have been impacted and generally postponed by two to three weeks as the incoming ships with longer routes are delayed, according to the ministry.
It is monitoring the situation in the Red Sea and will be holding an inter-ministerial meeting on Wednesday. "It (the crisis) will have some negative impact. But the extent of the impact will need to be assessed and we will do that assessment soon," the Commerce Secretary said.
The attacks by the Houthis on shipping vessels travelling through the lower Red Sea began in mid-November and have only increased since then in response to the war in Gaza.
Around 30% of the global container traffic and 12% of global trade traverses through the Red Sea strait, including 80% of India's merchandise trade with Europe, according to the ministry's estimates. It has observed that 95% of the vessels have rerouted around the Cape of Good Hope, adding 4,000–6,000 nautical miles and 14–20 days to the journey.
The ministry said major shipping lines stopped or temporarily halted Red Sea operations, which includes companies such as Maersk, MSC and Hapag-Lloyd AG.
A Bloomberg report estimated that India might see around $30 billion shaved off its total exports in the current financial year due to the surge in container shipping rates.
The costs of Indian shipments to Saudi Arabia, Yemen and Egypt have risen significantly, Ajay Sahai, chief executive officer of the Federation of Indian Export Organisations, had told NDTV Profit.
"Due to the Red Sea crisis, the Drewry Index—which is a container index for eight major shipping routes in the world—has gone up by $1,000 on average," Sahai had said. "Most private companies have put up a peak season surcharge of $1,500; a contingency/Red Sea surcharge, which varies between $1,500 and $3,000."
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