Crisis can impact India as 80% of exports to Europe takes place via Red Sea: Official

• The Red Sea shipping crisis could impact India’s exports to Europe
• About 80 per cent of the outbound shipments to Europe takes place through the Red Sea region.

Key Highlights

• This assumes significance as India’s goods exports to the European Union (EU) have already slowed due to weakening demand in the backdrop of the Russia-Ukraine war.
• The EU contributes to over 15 per cent of India’s total goods exports.
• A number of environmental related trade measures such as the carbon border adjustment mechanism and EU’s deforestation law are feared to hit India’s exports going forward.
• The ministry said that there has been an increase in attacks on commercial shipping vessels
  • Travelling through the lower Red Sea since mid-November and 80 per cent of India’s merchandise trade with Europe passes via the Red Sea.

Global issue

• Whole of commodity across the globe moves from the eastern to the western part through the Red Sea route
• the Red Sea region is vital for 30 percent of global container traffic and 12 percent of global trade
• About 95 percent of vessels have rerouted around the Cape of Good Hope, adding 4000 to 6000 nautical miles and 14 to 20 days to journeys.
• Indian shipments of low value products such as agriculture and textiles to Europe are primarily expected to face the impact of disruption in the Red Sea region.
• The union government has asked Export Credit Guarantee Corporation (ECGC) not to raise insurance premiums amid rising cost of shipping to Europe.

Prelims Takeaway

• Export Credit Guarantee Corporation
• Map based question