Monday, 2 September 2013 00:00
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India: Is it losing its miracle?
India, once called an economic miracle, cruising at a GDP growth of 8-9%, is in its tightest spot since 1991, as referred to by The Economist. Though in 2008 the Indian Prime Minister predicted the end of chronic poverty, ignorance and disease which has been the fate of millions of Indians for centuries, the outlook is a different one today.
The stock market has contracted by a quarter in dollar terms and the rupee has declined by 18% in three months. In fact, some foreign investors fear that India may freeze their funds, says The Economist. The panic that pushes the rupee further will fuel inflation.
Whilst India’s woes are partly caused by the global economic crisis, The Economist argues that the consequences of deadly complacency have led the country to miss a great opportunity. Growth has slowed to 4-5%, half of what it was, and inflation at 10% is worse than other emerging economies.
The current account deficit will have a bearing on its external trade. Besides, a weaker currency can have a severe impact for some firms with foreign loans.
Creating growth will mean far-reaching deregulation of protected sectors such as retail, revamping India’s infrastructure of ports, roads, power, pursuing Public-Private Partnerships in State monopolies from rail to coal, etc. For shipping and logistics in South Asia that have relied on India as the prime engine to propel demand growth, the unfolding events which will run up to general elections due in May 2014 will be of concern. As it did in 1991, India has the capacity to unleash its mighty potential: Will it?
China, Singapore take top spots
In the Liner Ships Connectivity Index published by the UN conference on Trade and Development (UNCTAD), China won with a top score of 157.51 and Singapore with 106.91. These figures contrast well with the score of 92.8 for USA and with low ranking nations such as Antigua with 2.43 and America’s Samoa with 4.19.
With regard to regular shipping services for imports and exports of manufactured goods, the nation’s access to world markets hinges on its transport connectivity. This index developed by UNCTAD measures a country’s level of integration in the global liner shipping network and is generated from five attributes.
a. Number of ships.
b. Total container carrying capacity
c. Vessel size
d. Number of services
e. Number of companies that deploy container ships on services from and to a country’s ports.
Container shipping capacity exceeds 17m TEU
Consequent to the delivery of 147 ships representing 938,500 TEU during the first seven months of the year, the box fleet capacity rose above 17m TEU as per the latest figures published by Alphaliner. The deliveries this year are expected to exceed 1.5m TEU.
Alphaliner said that increases was partly fuelled by carriers racing to add larger ships to their fleets in order to improve economies of scale and thereby, reducing operational cost.
This common theme of reducing operational cost has resulted in 24 ships of over 13,000 TEU being delivered so far this year with 10 more ships due by the end of the year.
The report further says that several other carriers are poised to make moves to place new orders, including MOL and NYK which have relied on their respective alliance partners, ultra large container ship tonnage until now, but will need to place orders for their own 14,000 TEU vessels very soon.
Container ports facing new challenges
Though Drewry’s latest annual report on Global Terminal Operations indicates that the sector remains dynamic and profitable, the challenges are numerous. The future demand growth will not be as strong as the boom periods of the 1990s and 2000s and is still is expected to grow at around 5% per annum.
With ultra large container ships coming on stream, shipping lines will rationalise ports of calls. Besides, formation of extra large operational alliances, notably the P3 alliance between Maersk, MSC and CMA CGM, would place pressure on port tariffs.
DP World’s falling 1H container volumes
DP World, managing 65 terminals across the world, has reported gross volumes of 26.6m TEU in the first half of the year, which is a 5.8% decline from the 28.2m TEU it handled in the first six months of 2012. In its largest region, the Asia Pacific and Indian Sub-continent, it reported a 6.2m decline in volumes to 12.5m TEU. The group is expected to operate its London Gateway container hub and adjacent logistic park in the final quarter of this year.
New Bill of Rights for seafarers
With a view to ensure protection for seafaring workers worldwide and fair competition for ship owners, the International Labour Organization has introduced a new Bill of Rights through its Maritime Labour Convention (MLC 2006). This convention will apply to ships and seafarers representing 60% of the world’s fleet.
ILO’s Director General said that the Bill of Rights will seek to ensure decent work for approximately 1.5m seafarers around the world who make shipping possible. Further, it provides a level playing field for quality ship owners, ensuring that decent conditions go hand in hand with fair competition.
The convention will demonstrate how tripartite dialogue and international cooperation can operate constructively for this most globalised of all industries.
[The writer, a Maritime Economist, is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a NORAD /JICA Fellow.]
