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Indian exports could have registered higher growth in January if the crisis in the Red Sea hadn't disrupted trade by forcing freight companies to take the longer route around Africa to reach the west, or wait at nearby ports for safe passage through the Suez Canal, a senior government official said.
"It is not like there has been no impact, it is possible that our export growth could have been higher without the Red Sea situation. However, despite the Red Sea crisis we have been able to sustain a growth in exports," the official said.
India's merchandise trade deficit narrowed to $17.49 billion in January as exports edged up by 3.1% year-on-year despite the ongoing crisis in the Red Sea.
According to data released by the commerce ministry on February 15, India's exports in the first month of 2024 amounted to $36.92 billion, up from $35.80 billion in January 2023 but down from $38.45 billion in December 2023.
The drop in exports in January 2024 compared to December 2023 is primarily on account of seasonality, Commerce Secretary Sunil Barthwal separately said during a briefing on February 15. Goods exports fell nearly 4% in the first month of 2024 compared to the previous month.
"Month-wise exports also have certain cycles because sometimes the demand for goods is much more, and sometimes there is an agriculture production cycle linked to it. Sometimes it is festivals that are linked to it. In January last year it (goods exports) was $35.80 billion. This year it is $36.92 billion, so there is a growth. This shows that despite the red sea issue we have been able to overcome that and our exports haven’t suffered on a month-on-month basis," Barthwal added.
Since the outbreak of the Israel-Hamas war in October, the Red Sea has been in the news for periodic attacks on commercial vessels by Houthi rebels of Yemen, raising concerns about its impact on global maritime commerce.
The Red Sea strait is crucial for 30% of global container traffic and 12% of global trade.
India uses the Red Sea route through the Suez Canal to trade with Europe, North America, North Africa and parts of Middle East. According to Crisil Ratings, these regions accounted for around 50% of the South Asian nation's exports worth ₹18 lakh crore and about 30% of imports amounting to ₹17 lakh crore last fiscal.
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