20/04/2024
India has steadily increased its share of global exports of goods and services, from 2.1% in 2016 to 2.5% in 2022. The country has a strong track record in exporting IT services, and in recent years, exports of goods have also picked up. The Indian government is actively working to make the country a major export hub and has created a regulatory environment that is more conducive to business competitiveness.
Between FY13 and FY22, India’s exports grew at a compound annual growth rate (CAGR) of 7.6%, while imports grew at a CAGR of 6.2%. In Fiscal 2023, exports grew by 16% year-on-year to a total value of Rs 36 trillion, while imports grew by 24% to Rs 57 trillion.
India’s logistics costs are still relatively high, at around 14% of GDP, compared to 10-11% for BRICS countries and 8-9% for developed countries. However, the government is reducing logistics costs, such as implementing the Goods and Services Tax (GST), investing in road infrastructure, developing inland waterways and coastal shipping, and building dedicated freight corridors.
The Sagarmala program is a major initiative that aims to enhance India’s port capacity to over 3,300 million tonnes per annum (MTPA) by 2025. This includes expanding the capacity of major ports to 2,219 MTPA and non-major ports to 1,132 MTPA by 2024-2025.
India’s strategic location on the Indian Ocean gives it a significant advantage in maritime trade. The country’s ports handle 90% of the volume and 70% of the value of India’s external trade. The maritime route is used to import essential goods such as crude petroleum, iron ore, and coal.
Port traffic in India is driven by several factors, including the presence of mineral, steel, cement, power, and discrete manufacturing clusters. These clusters are located in various parts of the country, such as Odisha, Jharkhand, Chhattisgarh, and Karnataka. Ports also play a vital role in the import of coal for power plants, with some coal-fired power plants located near ports such as Mundra, Krishnapatnam, and Jaigarh.
The largest port in India is Kandla Port, which handles around 65 million tonnes of cargo annually. Adani Ports and Special Economic Zone Limited (APSEZ) is the largest private port operator and logistics provider in India. In 2023, APSEZ handled 8.6 million twenty-foot equivalent units (TEUs) in containers, representing 42.5% of India’s container market share.
The maritime infrastructure industry is capital-intensive and requires significant regulatory approvals. It is also important to have a skilled workforce to operate ports efficiently. Some of the key risks faced by ports in India include slowdowns in the global economy, rising competition from other ports, government regulations, environmental concerns, and natural disasters such as cyclones. To maintain throughput, ports also need to keep up with evolving vessel technology.
Overall, the Indian maritime industry is on the right track. The government’s focus on improving port infrastructure and reducing logistics costs is creating a more favorable environment for trade. However, there are still some challenges that need to be addressed, such as the need for further investment in evacuation infrastructure and skilled labor.