Changing foreign trade dynamics of India & marine insurance
The healthy performance of India’s international trade over the last two decades reflects India’s increasing integration with the global economy. There has been a remarkable rise in the degree of openness of the Indian economy, and this increased interaction has resulted in thehigher growth of the economy as well asa rise ininternational trade.
This, combined with resource demand from the emerging economies and the rapid reconstruction and development projects taking place throughout the continent, has kept the Indian shipping market strong despite the lingering after-effects of recession continuing to hamper developed economies.
The strong growth in India’s merchandise exports has led to an increase in the share of India in the global export market.During January2017 exports showeda positive growth of 4.32 per cent in dollar terms (valued at US$ 22115.03 million) and 5.61 per cent in Rupee terms (valued at Rs. 150559.98 crores) as compared to US$ 21199.02 million (Rs. 142568.31 crores) during January2016.
Previously, India only exported traditional commodities which included tea, jute, cotton textile, leather, etc. But with the increasing diversity, India now exports over 8000 commodities. India has even emerged as a major exporter of computer software to some of the advanced countries like the USA and Japan. With trade links with almost all the countries of the world, India exports to more than 190 countries now.
Trend in exports and marine cargo premium collection
With exports rising, the marine premium collections have seen growth.If you carefully take a look at the chart, you will understand howexport potential has been playingan influential role in Marine insurance as both the line show a similar trend.
A strong positive linear relationshipcan be seen between the two, which indicates that both, foreign trade and marine insurance have moved in the same direction for the last ten years.
From the trend seen, we can very well infer that- “As international trade comes with various risks, marine insurance became a core part of the international trading process for the parties involved to insure their respective risks”.
Export potential’s role in defining the future of marine insurance business!
Marine insurance is known as a positive aid for various enterprises, importers, exporters and persons engaged in international trade and commerce.
No large-scale enterprise could possibly function had it not been possible to transfer the risks to their insurers. In business scenarios, especially in export, huge amount of capital is always at risk,and without insurance,enterprises would have had to put aside some of their capital resources against the possibility of losses.
However, through insurance, especially marine insurance, the need of keeping aside a portion of capital to meet the unforeseen contingencies does not arise, as insurers come forward to indemnify the insured against any losses.
India’s merchandise trade showed a growth up 8.9 per cent in April-July 2017. This number showed a positive growth after the cascading effects of the recent depression times. Demonetisation effect was a factor in delaying the execution of earlier orders, indicating a lull in the export market. Although this periodhad inevitably led to a shake-up in marine insurance, the effect can be positive as long as the industry embraces the change.
India’s efforts at improving export procedures have helped, in the ‘ease of doing business’. With the increase in export, there has been an increase in the number of marine insurance policies, as we have seen from the above analysis. This trend will continue to remain in the future as exports and imports increase.
The way ahead…
Looking to the future, robust economic growth, coupled with increasing trade between regions, is expected to drive the demand for marine insurance. The rising number of marine insurance providers will create an intense marketplace.
At the same time, the strong demand opportunities in the emerging markets will attract a pool of domestic and international suppliers, thereby driving market competition.