New Delhi:
As the battle within the Middle East escalates with Israel vowing to retaliate after the missile assaults by Iran, India Inc is bracing for a wider commerce disruption throughout the important thing Red Sea route.
The battle can result in greater cargo freight charges as Lebanon’s Iran-backed Hezbollah militia has shut ties with the Houthi rebels in Yemen — answerable for most assaults on ships travelling by way of the Red Sea route, say business consultants, including {that a} direct battle between Israel and Iran could severely disrupt the essential commerce route for the Indian exporters.
The Red Sea disaster began in October final yr, with Iran-backed Houthi rebels disrupting commerce within the space.
This has affected India’s petroleum exports which dropped 37.56 per cent to $5.96 billion in August this yr, down from $9.54 billion in the identical month final yr.
As per a latest Crisil Ratings report, Indian corporations use the Red Sea route via the Suez Canal to commerce with Europe, North America, north Africa, and a part of the Middle East.
The report talked about that these areas accounted for 50 per cent of India’s exports price Rs 18 lakh crore and 30 per cent of imports price Rs 17 lakh crore in FY23. The nation’s general merchandise commerce (exports and imports mixed) in FY23 was Rs 94 lakh crore, with 68 per cent (in worth phrases) and 95 per cent (in quantity phrases) shipped by sea.
The assaults on ships crusing within the Red Sea space since November final yr have compelled corporations to search for different, longer routes previous the Cape of Good Hope.
The Crisil report additional stated that this has not solely stretched supply time by 15-20 days, but additionally elevated the transit price considerably due to incremental freight charges and insurance coverage premiums.
Industry consultants say that India’s commerce with the Middle East nonetheless stays wholesome on account of pleasant regional gamers comparable to Saudi Arabia, the UAE, Kuwait, and Qatar. The bilateral commerce between India and the Gulf Cooperation Council (GCC) nations reached $162 billion final yr.
As per the most recent authorities knowledge, the GCC now contributes 15 per cent of India’s whole commerce and sectors like power, defence, safety and well being are rising within the area.
Moreover, in line with the most recent International Monetary Fund (IMF) knowledge, the commerce by way of the Egyptian Suez Canal nosedived by 50 per cent (year-over-year) within the first two months of the yr. In FY24, the Suez Canal’s annual income dropped by about 23.4 per cent as a result of Red Sea disaster. According to Osama Rabie, Chairman of the Suez Canal Authority (SCA), “revenues fell to $7.2 billion within the fiscal yr 2023/2024 that led to June from $9.4 billion a yr earlier”.
According to consultants, the rising tensions within the Red Sea space aren’t solely affecting the Suez Canal but additionally the maritime transportation market, commerce motion and worldwide provide chains.
On Wednesday, India issued a journey advisory for its residents, advising them to keep away from all non-essential journey to Iran as a result of escalating rigidity within the area.
(Except for the headline, this story has not been edited by NDTV employees and is revealed from a syndicated feed.)