Catching wind in the sails, finally

India is trying to ramp up its shipbuilding capacity to keep pace with its growing heft in manufacturing trade. Reports said that GoI is seeking investment from South Korean and Japanese ship manufacturers to establish the country as a major global shipbuilding hub. The country has acquired a degree of self-reliance in naval tonnage, but the spillover into merchant capacity has been weak. Existing capacity is being soaked up by defence contracts, squeezing both supply and demand for commercial shipping. Global shipbuilding nations such as China, Japan and South Korea have yards contracted out until the end of the decade while the domestic industry struggles to consolidate as demand within the country does not integrate. There is much talk about how India missed the bus for making LNG carriers despite subsidies for local shipbuilding. It is now trying to get its act together as the world pivots towards green shipping.

The obvious area to begin with is the cost of capital. Governments subsidise shipbuilding everywhere, and India must match these if it wants to compete. Capacities can only come up if legislation ensures demand, such as a law requiring coastal shipping to be conducted exclusively by Indian flag vessels. Public sector enterprises can be prevailed upon to think locally for their shipping needs. Dispute resolution must be brought onshore to encourage domestic shipbuilders to look beyond gov contracts that are less harsh over delivery slippages. Local administration needs to be more energetic about infra needs of the industry, such as dredging. These would all be conditions necessary to draw foreign shipbuilders to set up base here.

The policy framework has been in place for a decade with underwhelming outcomes. GoI is now doubling down on its efforts to speed things up. Lower-hanging fruit like ship recycling and repair may be within reach. India, however, needs to be able to build bigger ships, and many more of them, to cater to its own needs in maritime trade and be a vital node in Asia's trade with Europe.