New Delhi, Jan 29 (KNN) Global Trade Research Initiative (GTRI) has expressed concerns about the extended disruptions at the crucial Red Sea trade route posing a substantial threat to various sectors, on Sunday.

These sectors include global manufacturing sectors such as electronics, automobiles, chemicals, consumer goods, and machinery.

The economic think tank has raised the issue that industries relying on just-in-time manufacturing processes, with low inventory levels and a dependence on timely component arrivals, could be particularly vulnerable.

The report suggested that industries such as electronics, automotive, machinery, chemicals, pharmaceuticals, plastics, textiles, and consumer goods are expected to face production impacts due to disruptions in global value chains.

The Suez Canal is a crucial route for shipping components and finished products to different markets, and any interruptions may lead to manufacturing delays and increased costs.

"The adverse impact will multiply if the disruption continues beyond a few more weeks as it will impact not only trade but local productions of many industries, which rely on just-in-time procurement/import of inputs through the global value chains spanning both Europe and Asia," GTRI co-founder Ajay Srivastava stated.

He also pointed out that average container spot rates have more than doubled since early December 2023.

The crisis has led to a 233 per cent increase in freight costs for Basmati rice exporters, reaching USD 2,000 per 20-tonne container for destinations around the Red Sea, according to Srivastava.

Other sectors facing issues include life-saving drugs, textiles, diesel, ATF, and steel.

Exporters have expressed concerns that if the crisis continues, it will adversely affect the country's trade.

Some have suggested that India should consider building a significant domestic shipping company to reduce dependency on foreign shippers.

India, heavily reliant on the Red Sea route for trade and energy imports, is now faced with the need to diversify its trade routes.

The Bab-el-Mandeb Strait, crucial for 30 per cent of global container traffic, has witnessed increased tensions and attacks in 2023, impacting global shipping and trade routes.

(KNN Bureau)