Ports to clock 4%-5% volume growth in FY24 amid multiple headwinds : India Ratings

MUMBAI: Despite challenges posed by economic slowdown in importing markets like the EU and theUS,Indianportsareanticipatedto achieve mid-single digit volume growth on an aggregate basis in the financial year 2023-24, according to IndiaRatingsandResearch(Ind-Ra).

The resilience of Indian ports stems from enhanced operational efficiency, the government’s emphasis on developing downstream logistics infrastructure, and stability in freight rates,enablingthemtooffsetpotential lower volumes and achieve a 4%-5% year-on-year volume growth in FY24 (with a compound annual growth rate of3.5%duringFY15-FY23).

Notably, India’s overall Logistics Performance Index (LPI) rank improved significantly in 2023 despite disruptions in global shipping supply chains due to the COVID-19 pandemic. The LPI ranking climbed to 38 from the previous survey’s rank of 44 in 2018. Ind-Ra credits this achievementtostrategicinvestments in infrastructure, supply chain digitalization, containerization of cargo, and efficient rail and road connections linking major ports on bothcoasts.

Theaveragedwelltime,indicating the time containers spend in Indian ports between May and October 2022, was recorded at an impressive three days, equivalent to Singapore, the top-ranked country in the LPI Index. These measures have considerably enhanced the efficiency of Indian ports and bolstered their performanceinglobaltrade.

As trade lines have been re-established, container freight ratesreturnedtopre-pandemiclevels in the second half of FY23. Ind-Ra’s FY24Outlook:Logisticssuggeststhat normalization is likely to continue in the third and fourth quarters of FY24. The stability in freight rates is expected to bolster foreign trade, resulting in higher cargo volume growth and improved earnings and profitabilityforIndianportoperators.

DuringFY23,India’smerchandise exports recorded a notable growth of 6.9% year-on-year, amounting to $451 billion. However, total export volumes fell 13% year-on-year, reaching 16.1 billion tonne. The signs of slowdown in the EU and US economies mirror the deceleration in theirforeigntradewithIndia.

In FY23, the combined EU and US trade formed 33% and 15% of India’s total export value and import value in USDterms,respectively.Aprolonged slowdown or a potential recession in these geographies might present challenges for India’s cargo volume growth, particularly in terms of exports.