Disruptions in key shipping routes, particularly through the Suez Canal and Red Sea, have forced vessels to take longer paths around the Horn of Africa, leading to a 15-20 per cent increase in shipping costs
New Delhi: The escalating conflict in West Asia is hurting India’s trade with countries like Israel, Jordan, and Lebanon that are involved directly in the war, think tank GTRI said on Tuesday.
To navigate these turbulent times, India must stay vigilant and adaptable to the fast-changing geopolitical and trade landscape in West Asia, the Global Trade Research Initiative (GTRI) said.
During January-July 2024, India’s trade with countries directly impacted by the conflict has faced significant challenges.
“Exports to Israel dropped sharply by 63.5 per cent, Jordan saw a 38.5 per cent decline due to spillover effects, and Lebanon experienced a 6.8 per cent decrease,” GTRI Founder Ajay Srivastava said.
He added that the Israel-Hamas war, which erupted in October 2023, has now extended to Lebanon, Syria, and is indirectly impacting Jordan and Iran.
Key regional players like Saudi Arabia, the UAE, Kuwait, and Qatar have thus far remained uninvolved in the conflict.
“This neutrality has allowed India’s trade with these Gulf Cooperation Council (GCC) countries to increase by 17.8 per cent between January and July 2024 compared to the same period the previous year,” Srivastava said.
Disruptions in key shipping routes, particularly through the Suez Canal and Red Sea, have forced vessels to take longer paths around the Horn of Africa, leading to a 15-20 per cent increase in shipping costs.
“This has severely impacted the profit margins of Indian companies, particularly those exporting low-end engineering products, textiles, garments, and other labor-intensive goods,” the think tank said adding while India’s overall exports to the European Union grew by 6.8 per cent, sectors like machinery, steel, gems and jewellery, and footwear have all suffered declines.
Additionally, crude oil and petroleum imports fell by 32.38 per cent in August 2024, driven by reduced demand from Indian refineries and lower orders from Europe, it said.
“India faces tough times ahead, particularly for industries reliant on high-volume, low-value exports, as rising freight costs are expected to strain trade further,” it said.
However, it added that there could be relief if Israel succeeds in neutralizing the Houthis, the Iran backed Yemese rebels.
“This could potentially ease disruptions along the Red Sea. Israel has already launched strikes against the Houthis in response to their actions,” Srivastava said.