"India's trade diversification strategy exposes correlated risks in energy and export markets"
De-risking
reducing exposure to a specific supplier, market, or route without necessarily achieving genuine independence from correlated risks.
Correlated risk
the condition where diversified arrangements fail simultaneously because they share the same underlying vulnerability.
India's trade and energy import strategy has long been framed around the twin goals of diversification and de-risking — reducing dependence on any single supplier, route, or market. This vocabulary gained renewed urgency after the Generalised System of Preferences (GSP) revocation by the US, the post-2022 restructuring of global energy flows, and the disruption of West Asian shipping corridors. India imports more than 85 per cent of its crude oil requirements, making it one of the world's most import-dependent large economies on energy. Historically, the Gulf region supplied roughly half of this crude, with the remainder sourced from Russia, Africa, and Latin America. The strategic logic of diversification — spreading sourcing across geographies — was treated as self-evidently prudent policy.
On the export side, India's trade posture has been shaped by negotiations for bilateral and regional agreements — including ongoing discussions for a Bilateral Trade Agreement (BTA) with the US — alongside efforts to deepen ties with the EU, UK, and ASEAN economies. The working assumption has been that a diversified export-market portfolio insulates India from the policy choices of any single partner. The article under examination challenges both assumptions — on the import and export sides — by introducing the concept of correlated risk: the possibility that diversified arrangements can fail simultaneously for the same underlying reason.
The analytical core of this article is the distinction between apparent diversification and genuine hedging. Three tests are applied to India's current position.
The first test is physical routing. After the Strait of Hormuz became disrupted, Gulf producers rerouted volumes through Yanbu on the Red Sea coast and through pipeline capacity to Fujairah, allowing Gulf crude to resume reaching Indian refiners. However, these rerouted cargoes exit through Bab el-Mandeb — a corridor that has itself deteriorated sharply. Russian barrels, which now constitute roughly half of India's crude intake, traverse separate but equally constrained maritime corridors. The diversification of supplier has not diversified the chokepoint risk: multiple supply lines converge on the same vulnerable maritime passages.
The second test is substitutability, which reveals a commodity-specific asyminess in India's resilience. Crude oil is fungible — grades can be swapped, refineries can adjust, and a multi-continental basket is a genuine commercial achievement. …
Consider the following statements:
The effect of devaluation of a currency is that it necessarily
1.improves the competitiveness of the domestic exports in the foreign markets
2.increases the foreign value of domestic currency
3.improves the trade balance
Which of the above statements is/are correct?
Consider the following statements:
1.The value of Indo-Sri Lanka trade has consistently increased in the last decade.
2.'Textile and textile articles' constitute an important item of trade between India and Bangladesh.
3.In the last five years, Nepal has been the largest trading partner of India in South Asia.
Which of the statements given above is/are correct?
Which of the following has/have occurred in India after its liberalization of economic policies in 1991?
1.Share of agriculture in GDP increased enormously.
2.Share of India's exports in world trade increased.
3.FDI inflows increased.
4.India's foreign exchange reserves increased enormously.
Select the correct answer using the codes given below:
Consider the following statements regarding India's energy import vulnerability:
1.India imports more than 85 per cent of its crude oil requirements.
2.India's LPG imports are more diversified across suppliers than its crude oil imports.
3.Domestic LPG storage in India is measured in weeks rather than months.
Which of the statements given above is/are correct?
Which of the following best explains why crude oil diversification is described as 'largely a property of the commodity rather than a verdict on policy'?
With reference to maritime chokepoints relevant to India's energy security, consider the following pairs:
1.Strait of Hormuz — connects the Persian Gulf to the Gulf of Oman
2.Bab el-Mandeb — connects the Red Sea to the Gulf of Aden
3.Fujairah — located on the Red Sea coast of Saudi Arabia
Which of the pairs given above is/are correctly matched?
Consider the following statements about India's foreign trade policy amendment related to forced-labour imports:
1.India amended its foreign trade policy to prohibit imports made with forced labour.
2.This amendment resulted in India being placed in the highest tariff band under the US forced-labour statute.
3.The US forced-labour tariff instrument, unlike the earlier surcharge, carries no statutory ceiling and no expiry date.
Which of the statements given above is/are correct?
Want the full note, Prelims Facts & MCQ answers?
Create a free account — takes less than a minute.
Create free account