Indian Exports Facing Strong Headwinds Now

New Delhi: Increasing freight costs, shortage of containers and dependence on major shipping hubs and foreign carriers pose serious challenges to the country’s exports, think tank GTRI said on Sunday.

To address these challenges, the Global Trade Research Initiative (GTRI) recommended that India implement several strategies to boost domestic container production, enhance the role of local shipping companies, promote use of domestic containers, and strengthen local shipping firms.

“India can lower its risk of global supply chain disruptions by boosting domestic container production, encouraging the use of locally made containers, and increasing the use of Indian shipping companies for transporting goods,” GTRI Founder Ajay Srivastava said.

Between 2022 and 2024, shipping rates for a 40-foot container fluctuated significantly. It said that in 2022, the average cost was $4,942 due to the lingering effects of the Covid pandemic, while by 2024, the rate had stabilised around $4,775, it said, adding that these rates are still significantly higher than pre-pandemic levels, where the cost was $1,420 in 2019.

“The elevated freight rates reflect the persistent supply chain challenges that continue to burden global trade,”Srivastava said.

He added that there had been unverified reports of China hoarding containers to maximize its exports to the US and Europe ahead of potential trade restrictions and a hike in duties on solar panels, electric vehicles, steel and aluminium manufactured by Chinese firms located in China or elsewhere like in ASEAN (Association of Southeast Asian Nations) countries.

However, the real container shortage issue likely stems from broader logistical inefficiencies like port congestion and Red Sea disruptions rather than deliberate stockpiling, Srivastava said.

Freight costs for Indian exporters shipping goods to Europe and the US have more than doubled in the past year, driven by disruptions in the Red Sea. The GTRI said that last month, delays in ship arrivals at India port were caused by congestion at Singapore port. “Indian exporters may soon face another disruption if the US-China trade war escalates in the coming months,” it said.