India could lose billions in exports this fiscal year due to threats to cargo vessels posed by Houthi attacks in the Red Sea, Bloomberg reported on Monday, citing a study by a New Delhi-based think-tank.
The country’s exports could shrink by 6.7%, or roughly $30 billion, by the end of the year against the $451 billion total recorded in the previous year, according to calculations made by the Research and Information System for Developing Countries (RIS) institute.
The prediction is based on the surge in container shipping rates combined with a drop in shipments. The number of vessels passing through the shipping artery is reportedly down about 44% compared to the average for the first half of December, as many shipping companies have halted travel in the area or rerouted their cargoes. In the week to January 3, the combined tonnage of ships passing through the waterway had dropped to about 2.5 million gross tons, from about 4 million at the start of last month.
Meanwhile, shipping costs have spiked. The spot rate for a 40-foot container sent from Asia to northern Europe is up by some 173% from early December and from Asia to North America’s East Coast by 55%, according to the cargo booking and payment platform Freightos.com.
For India, which traditionally ships much of its cargo destined for Europe, the US East Coast, the Middle East and African countries through the Red Sea, the situation is especially dire. Indian exporters have so far been forced to hold back some 25% of shipments transiting the waterway, Ajay Sahai, head of the Federation of Indian Export Organizations under India’s Trade Ministry told the news outlet.
“The crisis in the Red Sea would indeed impact India’s trade and may lead to further contraction,” Sachin Chaturvedi, the director general of RIS, warned.
The Houthis have instituted a de facto blockade through the Red Sea and the Suez Canal, a major shipping waterway, for the past several weeks. They have been attacking vessels thought to be linked to Israel in what they say is a show of solidarity with the Palestinians following the escalation of hostilities in Gaza.
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