India must strengthen shipping capacity, naval protection amid growing chokepoints: GTRI
India must treat maritime insecurity as a long-term trade risk as the Red Sea crisis crosses 1,000 days, GTRI said. Longer shipping routes have raised freight, insurance and working-capital costs, particularly hurting MSME exporters trading with Europe and the US.
New Delhi: Economic think tank GTRI has warned India to bolster its shipping capabilities and naval defense due to emerging chokepoints, emphasizing maritime insecurity as a sustained trade threat. The organization highlighted that the Red Sea crisis has persisted for 1,000 days without a lasting resolution, demonstrating that military actions can deter missile strikes but fail to restore commercial confidence.
For India, the crisis has resulted in slower and costlier trade with Europe, the UK, North Africa, and the US East Coast, adversely affecting small and medium-sized enterprises (MSMEs) through increased freight, insurance, and working-capital expenses. GTRI Founder Ajay Srivastava noted that as shipping chokepoints intensify, India must prioritize enhancing domestic shipping capacity, trade finance, naval protection, and alternative transport routes.
The Red Sea, a crucial maritime link between the Indian Ocean and Mediterranean Sea, has been severely disrupted since November 2023 when Houthi forces targeting Yemen-based commercial vessels in the Red Sea and Bab el-Mandeb Strait began the disruption. This has led to significant detours around the Cape of Good Hope, increasing transit times, freight costs, and insurance premiums for Indian exports to Europe.
The Red Sea shipping crisis has been ongoing for 1,000 days, underscoring the long-term impact of the conflict on global trade. Major container companies continue to circumvent the Red Sea and Suez Canal, opting for Cape of Good Hope routes, which has reduced Suez Canal traffic by 60-70 percent and consumed 5-7 percent of global container capacity.
Freight rates are around 25-40 percent above normal levels, and ships are incurring war-risk insurance charges. Around 80 percent of India-Europe merchandise trade typically utilizes the Red Sea route, encompassing nearly half of India's exports and 30 percent of imports. The most vulnerable markets include the UK, Germany, the Netherlands, Belgium, France, Italy, Spain, Greece, Egypt, Israel, Jordan, North Africa, and the US East Coast.
During the crisis's peak, freight rates on some India-Europe and India-US routes surged by 200-400 percent, exacerbating fuel, freight, insurance, and working capital costs, particularly impacting low-margin goods like garments, engineering goods, chemicals, leather, carpets, rice, spices, grapes, and marine products. Srivastava emphasized that the 1,000-day milestone signifies that shipping disruptions resulting from conflicts can endure longer than business contracts, government support programs, and standard inventory cycles.
He urged India to regard maritime insecurity as an ongoing risk to international trade rather than a transient issue.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
