Attacks by the Houthis on ships led to US and allied responses, causing chaos in maritime trade. India’s small and medium-sized businesses, especially exporters, are bearing the worst of it.
Geopolitical tensions in the Red Sea have shaken up global trade. Attacks by the Houthis on ships led to US and allied responses, causing chaos in maritime trade. India’s small and medium-sized businesses, especially exporters, are bearing the worst of it. This situation reveals the vulnerability of Indian exporters and highlights the urgency for creative solutions and government aid to help them navigate the evolving global market. Let’s closely examine the main problems and see how exporters can tackle them with new ideas and support from the government.
One of the primary concerns for Indian exporters is the delayed and uncertain shipment schedules. The closure of key shipping lanes and the need to reroute cargo have led to significant delays and made it increasingly difficult for exporters to meet their delivery commitments. This, in turn, is straining their relationships with international buyers, who are growing increasingly frustrated with the unpredictability of the supply chain.
The disruptions have put a significant strain on the working capital of Indian exporters, particularly the smaller players. Delayed shipments caused stress on SME exporters to look for alternative methods such as air freight, which is more expensive, leading to more strains on working capital. With delayed payments from overseas buyers and the need to find alternative, and often more expensive shipping routes, many SMEs are struggling to maintain their cash flow.
This financial stress can have far-reaching consequences, from their ability to fulfil orders to their overall business viability. Furthermore, the Red Sea crisis has highlighted the vulnerability of smaller Indian exporters when it comes to their relationships with international buyers. With less negotiating power, these SMEs are often forced to accept extended payment terms or even concessions that further strain their working capital.
