Indian ports set to gain from global China+1 strategy

Indian ports are well-positioned to benefit from the global China+1 strategy as companies diversify their supply chains away from China. Moody’s Ratings indicates that while Chinese ports may face financial difficulties in the short term, Indian and Indonesian ports could see a rise in activity. This shift is driven by geopolitical tensions and India’s comparatively low exposure to US tariffs. The ratings agency also highlighted that India’s diversified export base and robust domestic economy help insulate it from US tariff risks

Indian ports are likely to see a significant boost from the global China+1 strategy, according to Moody’s Ratings in its latest report released on May 20. As global companies look to diversify manufacturing and supply chains away from China, India stands out as a key beneficiary.

Moody’s noted that while Chinese ports could face near-term financial strain, ports in India and Indonesia are poised for increased throughput as businesses shift operations.

The Moody’s report noted, “In Asia, Chinese ports’ financials could weaken although most have the financial capacity to withstand near-term stresses. And ports in India and Indonesia could benefit from the China+1 strategy – companies’ effort to diversify their manufacturing and supply chain operations by establishing facilities in countries outside China.”

Shift comes amid geopolitical tensions

The transition is occurring amid rising geopolitical tensions, which could pose additional risks to emerging markets. In particular, Moody’s highlighted the recent escalation in India-Pakistan tensions following the Pahalgam terrorist attack that left 26 civilians dead.

“Geopolitics are an additional stress for emerging markets, including the flare-up of tensions between India and Pakistan,” the report stated.

Despite these concerns, the report emphasized that a significant share of cargo at Indian and Indonesian ports caters to domestic markets, enhancing their resilience to external shocks.

While optimistic about long-term gains, the report acknowledged short-term regional risks, including recent India-Pakistan tensions, which could temporarily impact investor sentiment and disrupt trade, particularly in developing markets. However, these challenges are not expected to undermine the broader structural trends supporting India’s growth.

Robust economy and varied exports protect India from U.S. tariffs

The report emphasized that, despite geopolitical challenges, India’s exposure to US tariffs remains relatively low compared to other markets due to its diversified export base and strong domestic economy. These strengths, along with a large domestic market, enable India to better manage the impact of US tariffs.

In South and Southeast Asia, Vietnam has the highest export exposure to the US, followed by Cambodia and Thailand. Although Pakistan and Bangladesh have lower overall exposure, their exports are mainly concentrated in the food, textiles, and wood products sectors. These sectors typically exhibit higher price elasticity, making them more susceptible to declines in US demand.

While Moody’s revised India’s 2025 GDP growth forecast from 6.7% to 6.3%, it remains positive about the medium-term outlook, projecting growth of 6.5% in 2026. This revision reflects a cautious yet steady outlook amid changing global economic conditions and evolving trade patterns.

Growth Prospects

Strategically, India’s ports—backed by initiatives such as the PM Gati Shakti scheme and enhanced investments in port infrastructure—are recognized as vital links in the reshaped global supply chain. Growth in container and cargo volumes is anticipated to persist, especially at major hubs like Mundra, Jawaharlal Nehru Port, and Ennore.

As global manufacturing dynamics continue to evolve, Indian ports are poised to capitalize on the transition, positioning themselves as crucial nodes in the emerging global supply chain.