Centre is considering subsidizing exporters amid Red Sea crisis
India is exploring various strategies to aid exporters in tiding over the Red Sea crisis, as per Moneycontrol. These include offering subsidies, to counterbalance the increased shipping costs and insurance premiums resulting from recent attacks on cargo ships in the Red Sea. According to a government official, "Indian exports are getting impacted, and there are concerns that agricultural commodities may see a fall in exports, because it goes to Europe through the Red Sea route."
Agricultural exports at risk
Agricultural exports hold significant importance for India, as they directly influence farm income. From April to November 2023, India's agricultural exports to Europe totaled $2.28 billion, mainly comprising fruits, vegetables, coffee, and rice. The Red Sea route, responsible for about 12% of global trade, has experienced intermittent attacks on commercial vessels by Yemen's Houthi rebels since the Israel-Hamas conflict in October. This has raised apprehensions regarding its effect on worldwide maritime commerce.
Trade through Suez Canal under threat
India's exports to Europe through the Suez Canal encompass food products, clothing, and electronics, while imports primarily consist of crude oil. In FY23, India's overall merchandise trade with Europe and North Africa amounted to $106 billion and $98 billion, respectively. Ajay Srivastava, Founder of think-tank GTRI, estimates that roughly 50% of these imports and 60% of exports, totaling $113 billion, may have been via the Suez Canal.
Exporters concerned over rising shipping costs
Indian exporters have voiced concerns over escalating shipping costs due to the ongoing assaults on commercial vessels in the Red Sea. Freight companies are compelled to either take the lengthier route around Africa or wait at nearby ports for secure passage through the Suez Canal. The most recent attack transpired on December 31, when Houthi militants targeted a Maersk container vessel, prompting the company to suspend sailing through the Red Sea for 48 hours.
