Red Sea route crisis: The Commerce Ministry asks DFS to maintain credit flow to exporters.

Syllabus: GS-II;

Subject: International Relations/Economic Development

Topic: Government policies and interventions for development in various sectors.

Context: Commerce Ministry addresses Red Sea disruptions, and urges DFS to maintain credit for exporters; concerns rise after military strikes in Yemen.

Issue: Red Sea Disruptions.


  • Commerce Ministry instructs DFS to maintain credit flow to exporters amid Red Sea route disruptions.
  • Concerns arise after US and UK military strikes in Yemen impact shipping in the Red Sea.
  • Freight rates to Europe double due to security tension in the Red Sea region.
  • Consignments facing delays, impacting low-value product shipments like agriculture and textiles to Europe.
  • Government instructs Export Credit Guarantee Corporation not to raise insurance premiums amid rising shipping costs.
Red Sea disruptions impact on India:

  • 80% of exports to Europe affected, especially low-value goods.
  • Commerce Ministry urges credit flow to stabilize exporter finances.
  • Rerouted shipments via Cape of Good Hope increase time and cost.
  • Doubled freight rates strain exporter finances, affecting competitiveness.
  • Economic losses possible, impacting sectors dependent on timely exports.
  • Rising tensions contribute to oil price increases, affecting India’s energy costs.
  • Diplomatic efforts are needed for shipping route security and economic stability.
  • ECGC instructed not to raise insurance premiums to ease the financial burden on exporters.
  • Continuous monitoring is essential for flexible strategies amid uncertainties.

Way Forward:

The continuous monitoring, adapting logistics to alternative routes, and exploring diplomatic solutions to mitigate disruptions in the Red Sea region.

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