India Monitors West Asia Trade Risk
India's Commerce Ministry is actively reviewing trade risks from the escalating conflict in West Asia to maintain supply chain resilience. The disruptions have had tangible effects, though some are easing, with Air India Express having now resumed flight operations to and from Muscat.
The core of the disruption stems from Houthi rebel attacks in the Red Sea, forcing cargo ships to bypass the Suez Canal, a route that handles about 12% of global trade. Vessels are now rerouting around Africa's Cape of Good Hope, adding 14 to 20 days and up to 6,000 nautical miles to their journeys. This diversion has caused global container shipping freight rates to spike to 2.5-3.0 times higher than in late 2023. Spot rates for vessels on the Asia to Europe route have surged by nearly five times, with the cost for freight from Kolkata to Rotterdam jumping from $500 to $4,000. The crisis disproportionately affects capital goods and fertilizers; India relies on Israel and Jordan for significant portions of its Muriate of Potash (MOP) fertilizer imports. Key agricultural exports, including Basmati rice, tea, and spices, also face significant delays and rising costs. India's reliance on the region for energy is substantial, with over 40% of its crude oil imports passing through the Strait of Hormuz. A sustained $10 per barrel increase in crude prices could inflate India's annual import bill by $13-14 billion. An inter-ministerial group, chaired by Commerce Secretary Sunil Barthwal, is working to mitigate the impact, particularly for MSMEs. [4, 21
