Impact of Israel-Hamas Ceasefire on India's Trade

The recent ceasefire agreement between Israel and Hamas has the potential to reshape global trade dynamics, particularly for India. The conflict, which had severely impacted shipping routes, may finally be easing, allowing for a return to normal freight operations. This change is crucial as India heavily relies on the Suez Canal for its trade with Europe, the US, and other regions.

As the ceasefire holds, global freight rates are expected to decline. This is particularly beneficial for Indian exporters of low-margin products such as agricultural goods, textiles, and footwear. With around 90-95% of India's trade supported by foreign shipping companies, easing of freight rates could provide much-needed relief and boost India's export capacity.

Before the ceasefire, the rates had surged dramatically due to the ongoing crisis, causing Indian companies to face increased shipping costs. Exporters were already struggling with rising transport service charges, with remittances to foreign shipping lines exceeding $100 billion annually. The situation had turned into a significant burden for Indian exporters who were facing tough competition in global markets.

The Indian government has recognized the strategic importance of reducing dependency on foreign shipping. In response, it has initiated efforts to revitalize the domestic shipbuilding industry. A recent package worth Rs 69,725 crore was approved to support shipbuilding, with the aim of enhancing self-reliance in this sector. This initiative is expected to create jobs and attract massive investments into the maritime sector.

Under this package, the Shipbuilding Financial Assistance Scheme will be extended until March 2036, aiming to incentivize local shipbuilding efforts. The establishment of a National Shipbuilding Mission will oversee these initiatives. By boosting shipbuilding capacity, the government is keen to address both economic and security concerns associated with relying on foreign vessels.

Ultimately, the success of these measures will depend on the geopolitical stability in the region and the Houthis' response to the ceasefire. While the ceasefire may present an opportunity for trade to flourish, it is essential for India to remain vigilant and proactive in securing its maritime interests.