Government support measures, like the Rs 497 crore RELIEF scheme, aim to soften the impact of the West Asia crisis on Indian exporters. However, February trade figures and rising logistics costs reveal deeper issues that subsidies alone may not fix. The conflict's effects go beyond shipping delays to broader challenges for India's exports.
Shipping Costs and Delays Surge
The conflict in West Asia has directly driven up trade costs for Indian businesses. Container shipping rates have jumped as much as 40%, with emergency surcharges of $2,000 to $4,000 per container. War risk insurance premiums have also risen sharply. This has forced shipping companies to reroute vessels away from key routes like the Strait of Hormuz and the Red Sea. These diversions add weeks to delivery times, leaving an estimated 40,000 to 45,000 Indian export containers stuck at sea or in foreign ports. The near doubling of freight and fuel costs, combined with longer delivery times, is severely squeezing exporter profits and disrupting supply chains.
February Exports Decline
February 2026 trade figures highlight the immediate effect of these global disruptions. Merchandise exports fell slightly by 0.81% from the previous year, reaching $36.61 billion. Meanwhile, imports surged by 24.11% to $63.71 billion, mainly due to higher gold and silver purchases. This widened the merchandise trade deficit to $27.1 billion. This represents a significant worsening from the previous year, raising questions about the sustainability of export growth. While total exports from April to February 2025-26 grew a modest 1.84%, the decline in monthly performance signals strong challenges ahead. The Commerce Secretary has cautioned that March exports may also be affected by logistics issues.
RELIEF Scheme Offers Support
The Rs 497 crore RELIEF scheme (Resilience & Logistics Intervention for Export Facilitation) is the government's direct effort to ease these rising costs. It provides automatic extensions for export obligations and aims to cover extra freight and insurance expenses, especially for small and medium-sized businesses. However, the ongoing conflict carries sustained geopolitical risks and the potential for long-term disruptions. It's uncertain if a single relief package can address persistently higher operational costs. Some critics argue these measures offer only short-term help, not a fundamental fix for the cost disadvantages Indian exporters face if global shipping and insurance rates stay high.
Wider Economic Risks Emerge
The West Asia conflict also threatens India's wider economic stability. Higher global oil prices, driven by disruptions to key shipping routes like the Strait of Hormuz, directly impact India's import costs. If the conflict continues, oil prices could potentially double from early 2026 levels. This could fuel inflation, widen the current account deficit, and put downward pressure on the rupee. Analysts foresee challenges for sectors like pharmaceuticals due to rising raw material costs and for the IT sector amidst global uncertainty. While demand is expected to remain steady, the economy faces headwinds from economic volatility and geopolitical tensions.
Long-Term Competitiveness Concerns
Although India's economic defenses are stronger than during past geopolitical crises, the present situation reveals underlying weaknesses. Longer, more expensive shipping routes and higher insurance costs reduce India's competitive edge. Other countries face similar issues, but long-term effects will depend on relative costs and access to stable trade routes. Past geopolitical shocks have led to trade realignments, and this disruption could speed up a review of global supply chains. A predicted slowdown in global trade growth for 2026 adds to these challenges, requiring a focus on resilience rather than just expansion.
Navigating Future Trade
The significant widening of the February trade deficit means future export performance will depend heavily on how long the West Asia conflict lasts and its severity. Persistent shipping disruptions will likely increase cost pressures on Indian exporters, potentially causing further drops in export volumes and a larger trade gap. The government's RELIEF scheme provides immediate help, but a long-term strategy is needed. This should focus on diversifying trade routes, managing logistics risks, and boosting domestic manufacturing to better handle the changing global trade environment.