The Global Trade Research Initiative, in a report released on Saturday, warned that the crisis in the Red Sea could be prolonged, causing a 40-60 per cent increase in shipping costs and a 15-20 per cent rise in insurance premiums. The think tank suggested that the government should support exporters due to delays and increased shipping time of up to 20 days caused by rerouting of ships.
The Baltic Index, tracking global shipping costs, surged 85 per cent from December 29, 2023, to January 4.
Basic shipping costs and risk and peak season surcharges have also risen, with some routes experiencing a five-six times increase in total shipping costs.
Drones and missiles targeting merchant vessels have escalated shipping costs, impacting exporters’ margins, especially those responsible for delivering goods at buyers’ ports.
The Red Sea route through the Suez Canal, used by India’s exports to key markets, is severely affected.
The report recommends offering financial support and insurance schemes for affected Indian companies, as India faces significant economic and security risks from disruptions in the Red Sea passage.
It suggests diversifying crude oil and LNG sources and exploring alternative trade routes to reduce dependency on the conflict-prone Red Sea passage.