Defying Red Sea Crisis, India's Exports Expected To Rise Further In 2024

The Ministry of Commerce hinted on Friday that it expects better demand for Indian goods in the calendar year 2024, as exports have withstood the impact of the Red Sea crisis so far.

Merchandise exports in February stood at $41.1 billion, rising from January's $36.92 billion and December's (2023) $38.45 billion, amid fear of the Red Sea crisis impacting export figures.

Commerce Secretary Sunil Barthwal told the media on Friday that the February figures were very heartening, as they surpassed all expectations to be the highest export figure achieved in both merchandise and overall (exports) in 11 months.

On a cumulative basis, total April-February merchandise exports at $395 billion still haven't outpaced their cumulative year-ago trend when April-February 2023 recorded $409.11 billion.

However, given the current pace of growth, the ministry is optimistic that by the end of the fiscal 'overall exports will be higher than last year's record numbers,' according to the secretary.

"I express hope that March financial year-ending figures should be very good. What gives me hope again is that the predictions for calendar year 2024 by the WTO are much better," Barthwal said.

The World Trade Organisation estimated in October 2023 that merchandise trade growth would be 0.8% for 2023 and 3.3% for 2024.

The ministry credits exporters and manufacturing units for the resilient export figures. "If we can surpass a difficult year post Covid, the next year is quite optimistic...2024 will be a very good year for us," he said.

Talking to reporters on the impact of the Red Sea crisis, Barthwal noted that while exports to the EU and the USA haven't fallen much, the time taken and cost of transportation have increased.

Exports in 2024 so far are on account of past orders; therefore, the latest figures offer little insight on the current impact of the crisis on India's outbound shipments since the maritime crisis began in October 2023.

"I don't think the Red Sea crisis would dampen demand for Indian exports if the economic revival in the west is better. So the worst is over, and I am certain demand for Indian exports will rise in 2024," Barthwal told reporters on Friday.

The Global Trade Research Initiative predicts that the Red Sea shipping disruption's impact on trade figures will be visible in the new fiscal.

"With escalating everyday attacks and no end in sight, the Red Sea crisis will adversely impact trade volumes in substantial way in 2024...Countries in Asia, Africa and Europe will face most disruption across industries," the report said.

It raised caution that high shipping, insurance costs and delayed arrival of shipments would squeeze margins and make exports of many low-margin products unviable.

The current detour is expected to add 20 days to shipments from Asian producers to European consumers.

Estimates indicate that by mid-February 2024, approximately 621 container ships (globally) had changed their usual routes to avoid the crisis zone. These numbers exclude the impact of spiked container freight rates and insurance costs.