The Red Sea accounts for 50 percent of the country's exports and 30 percent of its imports

The Red Sea is a very important route for imports and exports. The Red Sea accounted for 50 percent of the country's exports and 30 percent of its imports last fiscal year. But currently the ongoing crisis around the Red Sea shipping route has a direct impact on imports and exports. The crisis on the Red Sea shipping route began in October 2023, when the Israeli-Palestinian war began, when Yemen-based Houthi militants began attacking commercial shipping vessels plying the route.
Domestic companies use the Red Sea route through the Suez Canal to save cost and time when trading with Europe, North America, North Africa and parts of the Middle East. In the last fiscal year, these regions accounted for 50 percent of the country's exports of Rs 18 lakh crore and 30 percent of its imports of Rs 17 lakh crore.
The country's overall merchandise trade was about Rs 94 lakh crore last fiscal, of which 68 percent by value and 95 percent by volume was sea-borne. India imports 60 percent of rock phosphate from Jordan and Egypt, 30 percent of DAP from Saudi Arabia, 30 percent of phosphoric acid from Jordan. 
Companies operating in sectors such as agricultural products and seafood may also see significant impacts, limiting their ability to absorb risks from rising freight costs due to the perishable nature of their products and/or lean margins.
Increasing attacks by Houthi militants on transit through the Red Sea from November 2023 are forcing ships to consider alternative longer routes. As a result, on the one hand, the delivery time takes 15-20 days longer and on the other hand, the transit cost increases significantly due to freight rates and insurance premiums.
Exports of some agricultural products, including fragrant basmati rice, have also come under pressure. Because rising freight costs have reduced exports. Similarly, marine items, mainly shrimp, may also see a significant impact on exports. Because more than half of the total exports (80-90 percent of production) go through the Red Sea. Their perishable nature and lean margins make exporters vulnerable to rising freight costs and competitive pressures from Latin American suppliers.
75 percent of home textile production is mainly exported to these regions. Their mid-teens margins can absorb higher freight rates for some time. Similarly, with 25-30 percent of agrochemical and specialty chemical manufacturers' revenues coming from these regions, exports may be less affected due to adequate channel inventory and near-term demand conditions.
Crude oil may also be affected as only 10 percent of global oil trade passes through the Red Sea. The impact of the Red Sea crisis will not necessarily be negative, but for some sectors, it will offer tailwinds. Shipping companies and freight forwarders should benefit from higher charter rates, after a year that saw a steep decline due to slowing global trade. However, some sectors such as shipping may benefit from increased freight rates. However, pharma, metal and fertilizer players will not be much affected.




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