India’s Exports to drop by 30 billion dollars due to diversion of ships from red sea channel

India can potentially see a drop in exports by around 30 billion US dollars, as exporters hold back on shipments due to rising fears following threats to cargo vessels on the red sea shipping channel.

Last year's export total stood at around 451 billion US dollars, and the rise in the fears regarding cargo ships on the Red Sea can see a drop of around 6-7 percent, said an initial assessment by the Research and Information System for Developing Countries, a New Delhi-based think tank.

SachinChaturvedi, the director general of the think tank, "The crisis in the Red Sea would indeed impact India’s trade and may lead to further contraction." However, the government hasn't released any estimates of loss of exports due to the Red Sea crisis.

In view of the rising threats on the Red Sea, the number of vessels passing through the Suez Canal has also dropped by 44 percent, as compared to the average first half of December 2023, according to Clarkson Research Services Ltd, a unit of the world’s largest ship broker.

Red Sea is one of the most relied upon export routes for India as it is the primary route for shipping to Europe, the US East Coast, the Middle East and African countries. The Modi government is in process of holding talks with export commission councils to ensure a safe passage for export vessels.

In the middle of the war between Israel and Hamas, Yemen’s Iran-backed Houthi militants have resorted to targeting vessels passing through the Red Sea with missiles over the past few weeks. The Houthis say they are going after any vessels that have a connection with Israel.

Last week, India sent a warship to the Arabian Sea where a Liberian-flagged vessel said it was hijacked near Somalia’s coast. The Indian Navy said it “successfully rescued” the ship. However, this has sparked major fears amid Indian export cargo ships.

According to Ajay Sahai, director general of the Federation of Indian Export Organizations, the rising threat has prompted the Indian exports to hold back on around 25 percent of their cargo ships transitioning through the Red Sea.

India usually exports a variety of goods including petroleum products, cereals, and chemicals using the Red Sea route. Exports in the current fiscal year are already to government data. flagging with a 6.5% contraction in the April to November period from a year ago, according