India's quest to become leading maritime shipping hub

Maritime transport serves as the bedrock of international trade and, by extension, the global economy. As per the International Chamber of Shipping, the international shipping industry is accountable for transporting approximately 90 per cent of global trade. Therefore, it is not unexpected that ocean transport or shipping continues to have a significant impact on India’s international trade, despite the considerable expansion of other alternative and leading modes of transportation, such as airways.

Due to its strategic geographic location, ports have been an integral part of Indian history. In contemporary times, these ports are vital to the country’s economy, managing 95 per cent of India’s external trade by volume and 70 per cent by value. In the fiscal year 2022, the cargo traffic at India’s major ports surged to 406.98 million metric tonnes, marking an approximate 15 per cent increase from the previous year. Hence, pointing at the growing role of the maritime sector in India’s national development.

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Consequently, it is unsurprising that ports have experienced substantial advancements in efficiency and capacity in recent years. India harbours ambitions of positioning itself as a manufacturing and export hub as well as a node in global supply chains. This demands that India enhance its competitiveness and connectivity on the world stage. A crucial step towards this objective is increasing the deployment of ships in the Indian market.

Specifically, India will need a greater number of larger vessels dedicatedly deployed to India-centric trade routes. This will ensure New Delhi is effectively integrated into global supply chains, facilitating smoother and more efficient international commerce.

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Recent advancements in port infrastructure, like the Vadhavan Port (Maharashtra), which, on completion, is expected to make India prepared to meet the additional demand generated due to the planned India-Middle East-Europe Economic Corridor (IMEC) and the Vizhinjam port, which recently saw the berthing of the first mothership, San Fernando, point out that India is looking to up its game in the arena of international maritime trade.

Analysts are confident in India’s ability to soon join a group of elite hubs like Singapore, Shanghai, Shenzhen, Busan, and Hong Kong that constitute the world’s biggest transhipment ports.

Vizhinjam, equipped with state-of-the-art technology and advanced automation and IT systems, is on track to become India’s first semi-automated port. When completed, this port will rank among the world’s largest and will serve as India’s premier transshipment hub. Here, cargo will be transferred from smaller ships to larger mother ships, streamlining the journey to their final destinations. The port will also provide large-scale automation for quick turnaround of vessels, with the ability to handle Megamax containerships.

The port is expected to attract some of the world’s biggest container ships. Given its strategic location near the southernmost tip of the country, the port has the capability to tap into vital global shipping routes, thereby allowing India to grab a bigger share of the international maritime trade, which is currently dominated by China. In this regard, the port will boost India’s ambitions to become an alternative manufacturing destination to China.

Furthermore, lower logistic and shipping costs and greater cargo and container capacity will position India as the main port of call instead of the side port of call for the major shipping lines. This aligns perfectly with the Modi government’s “Maritime India Vision 2030”, a strategic initiative aimed at transforming India’s maritime landscape, which focuses on developing world-class mega ports, establishing advanced transshipment hubs, and modernising infrastructure to enhance efficiency and global competitiveness.

While a lot has been discussed about the potential benefits of such ports in India, one aspect has been overlooked: India’s ability to weather geopolitical tensions arising in the sea and disrupting sea lines of communication (SLOCs).

Ports tend to exhibit a butterfly effect when it comes to geopolitical conflicts. In recent years, geopolitical tensions are becoming more regular as global powers clash more frequently and use geo-economics as their weapon of choice to challenge the sovereignty of rival states and change the power balance at both the peripheral and global levels.

In recent years, certain geopolitical events with wider implications have taken place, for example, the situation in Ukraine, a country responsible for nearly 10 per cent of global cereal production. The blockage of Ukrainian ports impacted global trade volumes and shipping, owing to the large volume of cereal exports that Ukrainian ports accommodate.

Similar incidents were also witnessed in the Strait of Hormuz, a vital artery that carries around a fifth of the world’s oil, which, over the years, has been the centre of numerous geopolitical tensions. In the past few months, global trade has been held back by disruptions at two major shipping routes. Attacks on vessels in the Red Sea have decreased traffic through the Suez Canal, the shortest maritime link between Asia and Europe, which typically accommodates around 15 per cent of global maritime trade. Meanwhile, across the Atlantic, a severe drought at the Panama Canal has led authorities to impose restrictions that have significantly cut down daily ship crossings since last October, further hampering maritime trade through this critical chokepoint, which usually accounts for about 5 per cent of global maritime traffic.

On January 26, 2024, the United Nations Conference on Trade and Development (UNCTAD) expressed profound concerns over the escalating disruptions in global trade, particularly stemming geopolitical tensions affecting shipping in the Black Sea, recent attacks on shipping in the Red Sea affecting the Suez Canal, and the impact of climate change on the Panama Canal.
In this context, it is the need of the hour to diversify the SLOCs and establish alternate yet equally critical shipping routes.

India’s maritime landscape, given its strategic location and its major ports serving as vital gateways for international commerce, can serve as a pivotal player in the global trade arena.

The country has a vast coastline of over 7,500 km, 12 major and 60+ non-major ports handling cargo, and a significant share of the world’s seafarers. The current world demography is favourable to India, giving it the base for necessary skilled labour power and providing shipping services to the world.

Despite its extensive coastline and more than 200 ports, India’s maritime industry still falls short on the global stage. In 2021, India accounted for just 2.4 per cent of global container traffic, a figure comparable to that of the United Arab Emirates (2.3 per cent) but considerably lower than Singapore’s 4.5 per cent.

Until now, the large container ships bypassed Indian ports due to insufficient depth, opting instead for neighbouring hubs like Colombo, Dubai, Singapore, and Malaysia. But with the recent developments in India’s port sector and efforts in enhancing shipping connectivity, it wouldn’t be wrong to predict that India might soon join the list of the world’s major hubs for trans-shipment.

The author is a researcher at the East Asia Centre, MP-IDSA, New Delhi, India. The views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.