Maritime Awareness Program Society

Shipping Vs Economy


Indian shipping sector plays an important role in India’s economy. In fact, transport, trade and economic development are mutually supportive. The overwhelming share of shipping in the carriage is about 95 per cent in terms of volume and almost two thirds of the total value of international trade. This establishes its predominance and importance as an international mode of transport.


The importance of shipping, over the period, has also increased due to the technological developments in transport. Especially since the advent of containerization culminating in multimodal transportation, majority of the containers move by this mode of transport.


India’s national flagships provide an essential means of transport for the import of crude oil, petroleum products, coal and fertilisers, export of iron ore and exports and imports of various general (liner) cargoes. National shipping also provides for a second line of defence in times of emergency – merchant ships help in transporting supplies, men and material for the navy. Indian shipping makes significant contributions to the foreign exchange earnings of the country as well.


Thus we can see the vital role played by shipping industry in expanding the growth of overseas trade, and is also a direct earner and saver of foreign exchange. Shipping is a valuable invisible export or foreign exchange earner for any country. Without shipping the import and export of goods on the scale necessary for the modern world would not be possible.

Recognising the role of the shipping industry in the context of overall growth strategy, in general, and the promotion of trade and foreign exchange earnings, in particular, the Indian government has made several amendments to the Merchant Shipping Act to encourage the modernisation and diversification of this industry.


Since the 1990s, the government has simplified the regulatory procedures for raising resources from commercial markets and external borrowing in order to facilitate the acquisition of new and second hand vessels at competitive prices. The shipping companies are now allowed to retain sales proceeds of their ships abroad and utilise them for fresh acquisition.


Government approval is no longer required for raising foreign exchange loans from abroad by mortgaging the vessels with the lender. The government has also granted automatic approval for foreign direct investment up to a limit of 74 per cent and non-resident Indians (NRIs) are permitted to invest up to 100 per cent with full repatriation benefits. While challenges exist, with proper regulation India’s potential as an international maritime service provider can be exploited.


The shipping sector is so global in nature that it will continue to be a foreign exchange revenue generator in the years to come.