India Takes Measures to Navigate Red Sea Crisis Impact on Global Trade
The interministerial committee, headed by an additional secretary-level officer and comprising representatives from ministries of defence, shipping, and external affairs, convened last week to engage with exporters and logistics providers. Union commerce secretary Sunil Barthwal emphasized the committee's focus on ensuring the continuity of shipments amid the evolving crisis in the Red Sea region.
Despite India's exported inventories being sufficient for a month, officials underscored the dynamic nature of the situation, necessitating constant vigilance and updates. The Houthi forces in Yemen, supporting Hamas in Gaza, have been targeting cargo vessels in the Red Sea corridor, prompting retaliatory measures from the US and the UK. The disruptions have resulted in a significant reduction in the number of vessels utilizing the Suez Canal route, a crucial artery for global trade.
To mitigate the impact on Indian shippers, the government is exploring measures to cushion increased logistics costs. Union commerce minister Piyush Goyal, in a briefing assured that India is prepared to respond quickly should the situation escalate and prolong. Efforts include discussions with the Export Credit Guarantee Corporation Ltd to lower interest rates for exporters facing increased insurance costs due to the conflict. The government is also actively planning alternative routes and exploring ways to reduce container costs for shipments.
The World Bank highlighted the potential for the West Asia crisis, coupled with the war in Ukraine, to disrupt trade and lead to surging energy prices, with broader implications for global activity and inflation. The current trade disruption is noted as the most severe since the Covid-19 pandemic, causing a surge in the costs of moving goods by sea to levels not witnessed outside that period.