Trade Negotiations and Tariff Concessions

As India engages in trade talks with Canada and the United States, there is a significant focus on tariff concessions. While lowering tariffs can reduce costs, tariffs are just one aspect of overall expenses.

Challenges Beyond Tariffs

• Higher and unpredictable ocean freight, insurance, and surcharges may negate tariff benefits.
• To address these challenges, India must ensure larger and consistent trade volumes.

Infrastructure Developments

India has been improving its ports, vessels, containers, and transport infrastructure. However, despite these advancements, merchandise exports have stagnated, and imports have increased.

• Only a few Indian ports can accommodate large vessels of 16,000-24,000 TEU.
• Such vessels rarely call at Indian ports due to fragmented cargo flows.

Comparison with China and East Asia

• China and East Asia present concentrated and balanced container flows, leading to more direct mainline calls.
• In contrast, Indian cargo often requires trans-shipment through hubs like Colombo, Singapore, or Port Klang, leading to additional costs and delays.

Impact on Exports and Imports

• For low-margin exports, such as textiles and processed foods, increased freight costs can be critical.
• Imports are similarly affected as rising freight increases the landed cost, impacting production costs and competitiveness.

Need for a Strategic Shift

Direct sailings by large, loaded vessels can reduce transportation costs. However, India needs to focus on:

• Increasing export volumes and cargo aggregation.
• Enhancing coastal feeder services and inland evacuation.
• Implementing route-specific efforts to ensure predictable loads.

The strategy should move beyond building capacity to fostering cargo creation, aligning port policies with a comprehensive export strategy.