The Red Sea issue has not yet hurt India’s imports or exports. Because shippers are choosing longer routes, the cost of transportation has gone up. As of yet, there is no effect in terms of volume. The only increase is in transportation costs. It has increased in every nation. Thus far, it did have commerce with no direct effect. Exporters said they are crossing their fingers because they think India’s exports may suffer as a result of the large increase in freight costs.
Increased freight costs, the need for war risk insurance, and considerable delays brought on by rerouting are the immediate repercussions. Since the beginning of December 2023, the average container spot rates have increased by over 100%. Exporters of basmati rice are facing freight prices that have increased by 233% to USD 2,000 per 20-tonne container for locations near the Red Sea. Because of the disruptions, exporters in India must diversify their trading routes, as the country is significantly dependent on this route for trade and energy imports.
Since the Red Sea route is quicker and shorter, most shipping companies choose it. Major Indian ports like Mumbai, JNPT, or Chennai serve as their starting points. From there, it travels west across the Arabian Sea, into the Red Sea, and then through the Suez Canal into the Mediterranean Sea. Depending on where they are going, ships can reach different ports in Europe from there.
The Cape of Good Hope route, on the other hand, avoids any possibility of delays or interruptions but is slower and lengthier than the Suez Canal route. When speed is not as important or when accessing the Suez Canal is problematic due to political unrest in the Middle East, it is utilized for shipments of bulk freight. It departs from Indian ports, travels south across the Indian Ocean, passes around Africa’s southernmost point, the Cape of Good Hope, and then proceeds north along the continent’s west coast before entering the Mediterranean Sea and arriving at ports in Europe. This strait is vital to India’s trade with the Middle East, Africa, and Europe as well as its supply of LNG and crude oil.