India’s export-import network is facing severe disruption as the ongoing West Asia conflict chokes key maritime routes, with Prime Minister Narendra Modi warning that ship movements through the Strait of Hormuz have become “challenging,” directly impacting trade flows.
The disruption affects nearly 14% of India’s $776 billion exports and 21% of its $1.2 trillion imports that pass through Gulf corridors, making the crisis a major concern for trade-dependent sectors. Shipping delays, rising freight costs, and insurance premiums are now eroding exporter margins and delaying deliveries across industries.
Freight surge and route disruptions
The conflict has forced shipping companies to suspend or reroute operations away from the Hormuz Strait. Major global carriers have halted Middle East services or shifted to longer routes:
- Maersk has suspended Hormuz operations, rerouting vessels via the Cape of Good Hope
- Hapag-Lloyd has paused Middle East routes
- COSCO has stopped bookings to the region
As a result, traditional shipping timelines have been severely impacted. Routes that earlier took around 15 days via the Suez Canal are now extending beyond 45 days through the Cape of Good Hope. Freight rates have surged by over 300%, while “war risk” insurance premiums have added further financial strain.
Exports sector hit hard
The crisis has hit multiple export sectors, particularly agriculture and manufacturing. Rice exporters are among the worst affected, with nearly 3,000 containers equivalent to around 4 lakh tonnes of basmati rice stranded at ports like Kandla and Mundra due to cancelled sailings. This threatens a market valued at approximately $4 billion annually. Engineering goods exports, worth $12.5 billion to Gulf Cooperation Council (GCC) countries, are facing extended delays, while gems and jewellery shipments—valued at $9–10 billion are at risk due to disruptions in Dubai’s trading hub. Textile and apparel exporters are also reporting margin erosion of 5–8% due to rising logistics costs.
Pharmaceutical and chemical exports to Europe have seen delivery timelines stretch to nearly 48 days, compared to significantly shorter durations earlier, further affecting competitiveness.
Government push for alternative corridors
In response, the Ministry of Commerce and Industry is accelerating efforts to diversify trade routes. Modi’s call for “daily inter-ministerial coordination” has led to increased focus on alternative logistics corridors.
The International North-South Transport Corridor (INSTC), linking India with Russia and Europe via Iran, is emerging as a viable alternative. The route significantly reduces transit time and has already been used for shipments through Vladivostok, offering faster delivery compared to traditional routes.
Simultaneously, the India-Middle East-Europe Economic Corridor (IMEEC), launched during the G20 Summit, is being positioned as a long-term solution to bypass chokepoints like Hormuz. The corridor integrates sea, rail, and pipeline networks connecting India to Europe via the Middle East.
Policy measures and in dustry support
The government has introduced several measures to support exporters, including easing port procedures for returned cargo, extending credit lines to MSMEs facing freight cost pressures, and expanding rupee-based trade settlements with Gulf nations. Exporters are also being encouraged to pre-position goods in Gulf free zones to mitigate future disruptions.
Strategic shift in trade flows
Interestingly, Russian oil shipments to India have increased sharply, with volumes routed through alternative maritime paths that bypass the Gulf, highlighting a broader shift in global trade patterns. Eastern routes via Vladivostok are gaining traction, particularly for time-sensitive exports like pharmaceuticals and chemicals.
As the conflict enters its fourth week, the crisis underscores India’s vulnerability to geopolitical disruptions in critical trade corridors. While alternative routes like INSTC and IMEEC offer relief, the immediate impact on exporters remains significant.
