India: The Red Sea crisis caused risks to inflation and growth

The Indian government said on Friday that disturbances in the Red Sea pose risks to inflation and economic growth in India due to the resulting rise in oil prices, highlighting the need to diversify trade routes.

According to Reuters, the Indian Ministry of Finance said in its monthly economic review that a combination of higher shipping costs, premiums on insurance and longer transit times could make imported goods “significantly more expensive.”

India’s exports of agricultural commodities, textiles, chemicals, capital goods, marine and petroleum products are likely to be affected by the unrest, and this will affect the price competitiveness of its exports.

Despite the obstacles facing India’s strong growth and the stability of its inflation system, the ministry expressed confidence that the economy will end the current fiscal year with positive readings. The fiscal year in India begins in April and ends in March.

The government announced that it had raised the official estimate of GDP growth for the current fiscal year to 7.6% from 7.3%, indicating “the continued strength of the Indian economy.”

About 80% of India’s merchandise trade with Europe, which includes key products such as crude oil, auto parts, chemicals and textiles, passes through the Red Sea Route, where missile and drone attacks by Yemen’s Houthi movement are forcing many shipping companies to reroute ships from The Suez Canal to Cape of Good Hope route around the southern tip of Africa.