Collapse of the Afghan government and the return of the Taliban have compelled Indian govt and traders to think of a new approach in the India-Afghanistan trade relationship. The change of guard in Afghanistan has become a worry for India that has invested heavily in Afghanistan and now unsure of the future of their bilateral trade ties.
When the US-NATO forces entered the region to help Afghanistan fight the Taliban, India had made over $3 billion investments in Afghanistan over those years to build infrastructure towards goodwill and the process of peace and reconciliation in that country.
Why did India Invest in Afghanistan?
The shortest route for India to trade its goods is Pakistan, but due to the hostility between the two countries, it is not possible for India to travel through that country. Therefore, India needs an alternative and that is Iran through Afghanistan.
India has invested in Chabahar port in Iran which has access to Afghanistan. But the problem for India was the highway network in Afghanistan that made transit difficult. Therefore, India was left with no option but to invest in Afghanistan’s road infrastructure. The 218-km Zaranj-Delaram highway was built by the Border Roads Organisation of India with an investment of $150-million. India has also built a railway line between the port and the border and spent close to $134 million to facilitate ease of trade.
India has invested in logistics development of Afghanistan with an assumption that once Afghanistan is developed fully it can contribute to the full-fledged trade relations between the two countries. Moreover, India’s investment in Afghanistan is also influenced by its desire to limit Pakistan’s sway over that country.
Trade between India and Afghanistan
Afghan exports to India include dried raisins, walnuts, almonds, figs, pine nuts, pistachios, dried apricot and fresh fruits such as apricot, cherry, watermelon, and a few medicinal herbs. On the other hand, India’s exports to Afghanistan include tea, coffee, pepper and cotton, toys, footwear and various other consumable items. The bilateral trade between India and Afghanistan was $1.4 billion in 2020-21, compared to $1.52 billion in 2019-20. Exports from India were valued at $826 million while imports amounted to $510 million in 2020-21. Afghanistan has been the second-biggest buyer of Indian sugar in the 2020/21 marketing year ending on Sept. 30, purchasing a record 624,000 tonnes.
Indian traders and government is hopeful that Exim trade between the two countries has stopped only temporarily it will resume full-fledged ones banks start working. They cite the instance where India was importing and exporting commodities from Afghanistan even during Taliban rule during 1996 to 2001.
How the current situation in Afghanistan is impacting Exim trade
Currently, in the changed political context in Afghanistan, there is a lot of uncertainty over Indian investment towards logistics development in Afghanistan. As India is one of Afghanistan’s biggest export markets for goods like dried fruits, carpets, wool among other things. The recent reports like Taliban sealing the Torkham and Chaman borders, the only land routes used for trade activities from India to Afghanistan, are making Indian exporters worried.
Recently, Federation of Surat Textile Traders Association has expressed apprehension over pending funds of about Rs 4,000 crore from Afghanistan which have gotten caught with the Taliban taking control of the nation. As Afghanistan’s central financial institution has instructed the industrial banks to not enable company checking account holders to withdraw cash for any function or to hold out any digital transaction inside or outdoors of Afghanistan
As some experts are questioning India’s initiatives in the war-torn country, some are of the opinion that Indian investment will fetch trade and logistics benefits to the country. Now only future will reveal the question of how does India guard its investments in Afghanistan? Or what does the future hold for India-Afghanistan trade ties, at least not until things settle down in a war-torn country.
