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Context: 

India’s trade growth is planned around containerized transport of goods but there is inadequate production of containers in India.

Introduction

As per a report published by the India Brand Equity Foundation (IBEF), around 90% of the world's trade is transported by sea and almost 95% of the trade volume and 70% by value in India is handled by maritime transportation. Containers are the medium through which these trades are made possible. 

However, there are shipping container shortages. Due to this shortage India has to depend on foreign-made containers. 

This dependency is in turn affecting India's global trade competitiveness.

Impact of container shortage on India’s trade:

High cost of freight 

Freight costs for Indian exporters have significantly increased in recent times. Shipping goods to the European and the United States markets has become highly expensive as the rates for a 40-foot container reached around $4,775 in 2024, compared with just $1,420 in 2019. 

Increased transit time 

The delays caused by port congestion and the limited availability of containers extend transit times, which increases the risk of missing delivery deadlines and losing key customers in international markets. 

Exporters in sectors such as textiles, electronics, and agricultural products are particularly vulnerable, as these goods are time-sensitive and require efficient logistics to maintain market share.

Impact on small and medium enterprises (SMEs) 

Rising freight costs and container shortages severely affect small and medium enterprises (SMEs) as they rely on cost-effective shipping to remain competitive in global markets. 

Underperformance of ports

Indian ports are at a strategic location on the East-West trade route but cannot aspire to be hub ports because of container shortages. As a result, Colombo, Dubai and Hong Kong draw high ship traffic, not Indian ports. As ports don’t develop, exports become further costly.

Susceptibility of Indian trade to market fluctuations

Around 90-95% of India’s total cargo is transported by foreign carriers which includes Maersk, MSC(Mediterranean Shipping Company), and COSCO(China Ocean Shipping Company). 

This dependence inflates costs and limits India’s ability to control shipping schedules and access, making India’s export sector highly susceptible to international market fluctuations.

Impact on India's Make in India initiative or Atma Nirbhar Bharat 

The Chinese manufacturers supply about 90% of the world's containers and India fulfils more than 80% of the container requirements from China.

India manufactures around 10,000 to 30,000 container boxes a year as compared to China, which manufactures 2.5 to 3 million container boxes per year. 

In India, it takes $3,500 to $4,800 to make one container whereas in China it costs $2,500 and $3,500. 

The Government of India is promoting domestic production of container boxes through Public-Private Partnerships (PPP) between the Container Corporation of India and private players. However due to cheap production costs in China,  the private players in India find it an unattractive sector.

The dependency of India on China and market dominance of China in the container manufacturing sector adversely impacts the objectives of Atmanirbahta in the Container sector. 

Container Market Size of India According to Grandviewreserach, The container market size of India will be valued at USD 10.3 billion by 2028. Moreover, it is expected to grow at a compound annual growth rate (CAGR) of 1.7% during the forecast period. The growth is the result of the increase in maritime shipping due to an increase in trade agreements across nations. The market is expected to further grow over the forecast period due to the expansion of the e-commerce industry, digitalization in container shipping, and rising demand for specialized containers. End-use Insights The end-user segment of countries in India is further divided into food and beverage, consumer goods, industrial goods, healthcare, and others.  The consumer goods segment holds a significant market share in 2020. Consumer goods primarily include electronic devices, toys, and furniture, among other goods that are transported through shipping containers.

Way ahead

Expand container production: 

India can scale up its container manufacturing capacity by investing in infrastructure and offering financial incentives to producers. 

Emerging production hubs in Bhavnagar (Gujarat) and Chennai (Tamil Nadu) need to be fully supported to meet domestic and global demand. 

Promote the use of Indian-made containers: 

Policies that incentivise exporters to use domestically produced containers should be framed. This could include preferential treatment for exporters who use Indian-made containers, provided these policies align with international trade regulations.

Strengthen domestic shipping firms: 

India should provide subsidies, tax breaks, and other incentives to Indian shipping companies to enhance the manufacturing of containers and development of the shipping Industry. 

The development of a robust domestic shipping sector will not only lower costs but also increase control over shipping schedules and logistics.

Improve port infrastructure: 

Accelerating the Sagarmala project, which aims to modernise India’s ports, is critical to ensuring that goods can be shipped efficiently and cost-effectively. Better port infrastructure will support the increased production of containers and streamline logistics, reducing delays and lowering costs.

Conclusion:

The government is considering providing financial support for local manufacturing of shipping containers due to a growing shortage and rising costs post-Covid. A viability gap funding (VGF) scheme is being discussed as part of a mission-mode implementation plan to promote Atmanirbahrta in container manufacturing.

Important articles for reference

India’s port development

Logistics Performance Index (LPI) 

Sources:

THE HINDU

GVR

POLICYCIRCLE

PRACTICE QUESTION Q.How does the shipping container shortage affect India’s trade competitiveness? Discuss the measures the government could take to enhance domestic container production and improve the overall shipping infrastructure to mitigate these challenges.(250 words)