When Freight and Fear Outweigh the Rupee: Why India Is Insuring Its Labour-Intensive Exporters Against War

Exports Up

18.51%, Garments Down 6%: The Divergence the RELIEF Scheme Is Meant to Contain At the aggregate level, the export story looks excellent. India's merchandise exports rose 18.51% to 259.89 billion dollars in April-September 2026 and electronic goods exports grew 70.44%.

Look one level down and a different picture emerges. Comparing the same six months of FY26 and FY27, Commerce Ministry data reported by the Indian Express show:

• textiles falling from 7.76 billion dollars to 7.28 billion dollars, down 6.2%; - ceramic and glass products falling from 2.06 billion dollars to 1.64 billion dollars, down 20.6%; - leather products down 3%; - fruits and vegetables down 9.6%, tea down 13.6% and oil meals down 26%. Rice, one of the largest exports to West Asia, grew only 2.5%. These are the industries that employ the most people and they are the ones losing ground.

Why a

weaker rupee did not help A weaker rupee helps exporters through one route: Indian goods become cheaper in dollar terms. That helps only if the other costs of reaching the buyer stay stable. On the West Asia and Gulf route, they have not. Consider a garment exporter selling to the UAE. Its margin may be a few percentage points of the order value. Since the disruption began, three costs have risen at once:

1. Freight rates have climbed as ships reroute and ports congest.
2. Insurance premiums for war and political risk have risen sharply.
3. The risk of non-payment has increased, because a buyer in a conflict-affected market may be unable or unwilling to pay. Together, these can wipe out a thin margin entirely, whatever happens to the exchange rate. An electronics exporter with wider margins can absorb the same costs. A garment, ceramics or tea exporter often cannot and so stops shipping. That is why exports to the UAE, India's second-largest export market, fell by about 11% in the same period.

What

RELIEF does and what it does not do RELIEF works through ECGC, the State's export-credit insurer.

• Component I covers up to 100% of losses on shipments already caught in the disruption.
• Component II, now extended to 31 March 2027, gives 95% cover on new shipments, above ECGC's usual maximum of about 90%.
• Premiums are frozen at pre-disruption levels, so an exporter's insurance cost does not rise with the risk. In effect, the State takes on the war risk that a small exporter cannot carry, so that the exporter keeps shipping to the Gulf rather than withdrawing from a market it took years to build. The scheme has a clear limit. It insures against loss; it does not lower freight rates or clear port congestion. It keeps exporters in the market, but it does not make shipping to that market cheaper. There is also a structural point. India's exports to Oman rose 47.4% in the same period, helped by the India-Oman free trade agreement that came into force earlier in the year. Market access and diversification are therefore as important as insurance. For the aspirant, the lesson is that headline export growth can hide a structural divergence. Policy for employment-intensive sectors now has to deal with logistics and geopolitical risk, not only with the exchange rate.