90% of India’s goods trade runs on foreign ships: Sanjeev Sanyal on India's biggest geopolitical vulnerability

BT India @100: India’s dependence on foreign shipping lines for its international trade is one of the country’s biggest strategic vulnerabilities, economist and Prime Minister’s Economic Advisory Council member Sanjeev Sanyal said in an exclusive interview with Business Today.

In a conversation with Business Today's Editor-in-Chief Siddharth Zarabi at Business Today's India @ 100 event, Sanyal said more than 90% of India’s imports and exports are carried by foreign ships, leaving the country exposed to disruptions in global shipping and geopolitical tensions.

‘We are essentially an island nation’

Explaining the strategic importance of shipping, Sanyal said India may have land borders with several countries, but from a trade perspective, it is effectively an island nation.

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“More than 90% of our imports and exports are carried on foreign ships,” Sanyal said, calling it India’s “single biggest geopolitical vulnerability”.

He pointed out that India’s trade with major economies such as China is largely maritime. This means that disruptions to shipping routes or decisions by major shipping companies could have an immediate impact on the Indian economy.

“We don't need sanctions from countries. Three shipping lines decide they don't like us and we would be in deep trouble,” Sanyal said.

China dominates global shipbuilding

Sanyal highlighted the scale of China’s dominance in the global shipbuilding industry. According to him, China currently accounts for around 55-60% of ships being built globally.

Japan and South Korea are the next major players, accounting for roughly 15-20% each, depending on the year. The rest of the world combined accounts for only about 5%.

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India’s share, meanwhile, was less than 1% until recently. Sanyal said this imbalance represents both a vulnerability and an opportunity for India, particularly as the government has begun making significant changes to regulations governing the shipping and shipbuilding sectors.

Financing key to building a shipping industry

Sanyal said shipping is fundamentally a long-term financing business because ships typically have a lifespan of 30-40 years.

Until recently, Indian shipbuilding faced a major financing disadvantage because the sector had not been granted infrastructure status. As a result, banks were largely unwilling to provide the long-term funding required to build and operate ships.

“Ships last for 30-40 years,” Sanyal explained, adding that without long-term finance, “you cannot have a shipping industry”.

He said the rules governing ship ownership, flagging and financing have been substantially overhauled over the past 24 months. The changes, he argued, are already showing results. Indian shipyards that were previously struggling are now receiving large orders, with some reportedly having order books extending five to six years.

India has ‘every ingredient’ to become a shipbuilding hub

Sanyal believes India has most of the fundamentals required to become a major shipbuilding nation.

First is demand. With more than 90% of India’s goods trade transported on foreign ships, the domestic market for an Indian-owned and Indian-built fleet is significant.

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Second is steel. India is the world’s second-largest steel producer, providing a critical raw material for shipbuilding.

Third is engineering and design capability. Sanyal pointed to India’s ability to build sophisticated defence platforms, including nuclear submarines and aircraft carriers, as evidence that the country has the technical capabilities required to manufacture commercial vessels.

The fourth factor is labour. Shipbuilding is a labour-intensive industry involving extensive welding, fabrication and assembly. Sanyal said India’s young workforce could become a major advantage as the sector expands.

India also has a long coastline, adding another structural advantage.

India could become a top-four player

Sanyal said the combination of policy reforms, financing, demand, skilled labour, steel production and engineering capabilities could transform India’s position in global shipbuilding. Foreign companies are also showing interest in the sector. He cited interest from major international shipbuilders, including Hyundai and Mitsubishi, as evidence of the changing landscape.

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“I can tell you within five, six years, we will emerge as a serious number four player,” Sanyal said.

He added that once India reaches that position, the next challenge would be scaling up further.

The broader objective, according to Sanyal’s assessment, is not merely to build ships domestically but to reduce India’s dependence on foreign shipping lines and strengthen the country’s economic and geopolitical resilience.

Watch full conversation here: