Goyal pledged continued government support to exporters in response to increasing tension in West Asia and their impact on trade routes, as some shipping companies have recently suspended numerous routes through the Gulf. Exporters have been particularly concerned about increased logistics costs, with both freight rates and insurance premiums rising significantly, and container shortages compounding supply chain challenges.
To that end, the government has initiated daily meetings with exporters to address their concerns and has also established an oversight group comprised of multiple ministries that will monitor disruptions on a continuous basis. Goyal assured exporters that if necessary, the government would actively intervene with respect to any trade issues, stating that “the government will use every tool in our policy toolbox.” In addition, Indian authorities have taken steps to ensure that India’s global trade obligations remain fulfilled despite any disruptions.
Shipping disruptions raise costs during the India export disruptions
At the same time, shipping routes via the Gulf also lack predictability, and many major shipping companies have slowed their services through the Strait of Hormuz; subsequently, shipping companies are now taking alternate routes, which are longer than before, leading to an increase in shipping rates. Other increases experienced by exporters are demurrage and storage fees, which have increased due to the difficulty in shipping goods out of Israel. Exporters are also being charged higher rates for insurance on their goods due to the risks associated with regional conflicts.
The commerce ministry has initiated discussions with the shipping industry to explore options; officials from the commerce ministry and the transport ministry have worked collaboratively on this effort; Mr. Goyal expects a resolution to the shipping crisis will be found; “I am hopeful we will be able to reach a solution.” Exporters are requesting immediate help from the government, and industry groups are requesting a higher RoDTEP incentive; businesses are also requesting government-backed credit facilities. Helping exporters with these changes will reduce the liquidity strain faced by exporters.
Gulf region remains crucial for India’s exports
Gulf regions play a crucial role in global trade due to many GCC countries importing many goods from India. The amount that these regions export is large (e.g., the UAE’s exports of approximately $36 billion). The total amount of exports from the Gulf reaches approximately $56.8 billion. Therefore, extensive conflict in these areas threatens to impact export volumes. However, India is still able to fulfil its obligations internationally.
Minister Goyal remarked on India’s history of being reliable during global shortages and crises and noted that it is still a “trusted partner”. Also, India continued to fulfil export obligations despite the disruptions caused by the COVID pandemic. As a result, policymakers would like to protect the integrity of global commitments. Authorities continue to monitor regional conflict risks, which could have an impact on exports. Analysts warn that prolonged conflict could deepen India’s export disruptions and increase costs for exporters across multiple sectors.
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