MSMEs yet to cross Red Sea hurdle

Despite the tussle in Red Sea, as per Industry reports India undoubtedly maintains steady growth in exports. The Red Sea route through the Suez Canal plays a pivotal role in connecting domestic companies with markets in Europe, North America, North Africa, and parts of the Middle East.

India’s total exports were USD 776 billion in FY 2022-23 with a year on year growth of about 15%; the exports will be higher than the last year says an insider. But who are we talking about, the crony corporates or the MSME’s?

The Red Sea strait, serving as a linchpin for 30% of global container traffic and 12% of global trade, underscores its importance in the interconnected World of commerce. Lately many of the small businesses have closed down, with MSME sector accounts for 30 percent of GDP, 40 percent of exports and employs 12 crore people, if the figures are to be believed 72 percent of the MSMEs are stagnant due to anti-MSME policies and higher tax rates.

It is noted that the attacks by the Houthis on ships led to US and allied responses, causing chaos in maritime trade for MSME exporters.

This geopolitical tension in the Red Sea have shaken up global trade with an urgent need for creative solutions and government aid to help small businesses navigate the evolving global market.

One of the primary concerns is the delayed and uncertain shipment schedules besides the closure of key shipping lanes and the need to reroute cargo, leads to considerable delays in delivery. This, unpredictability results into strained relationship for small businesses with international buyers.

These Red Sea unreliability, has put a significant pressure on the MSME exporters as their profit margins have wiped out, giving them less negotiating power further straining their working capital. Delayed shipments and payments force SME exporters to look for alternative methods such as air freight, expensive shipping routes, are the serious concerns for MSMEs .