Economic Highlights

New Delhi, 23 August 2021

Afghan Maze

BILATERAL TRADE TO BE HIT

  By Shivaji Sarkar

 The murky Afghan situation has raised serious concerns for India. It was never a strong player but was able to make a niche among Afghanis with its humanitarian aid and $3 billion investments since 2001 US blitzkrieg for rebuilding a devastated country. The geo politics is to have repercussions on the subcontinent not only in trade terms but overall security.

 Rightly India avoided US prodding to be a military ally, possibly learning from the Sri Lanka peace-keeping experiment. The stakes were always high at this melting pot. But what can India do now? India has been investing in a relationship in unstable regime and Afghans coming for training have always acknowledged the warm gestures. Indian diplomacy played a critical role of emotional security, cultural ties and whatever level of trade and rebuilding mechanism it could provide. Thousands of Afghans are in India for work, training, re-skilling, education and medical treatment. Over 2,200 students of Afghan-origin studying in India on scholarship stare at an uncertain future. The Indian Council of Cultural Relations (ICCR) would continue to extend the help.

 Though not unexpected, India is hurt that the 20-year US war against terrorism led by Taliban offshoots leading to killing of Osama bin Laden and its top hierarchy strangely ‘ends’ in replacing Taliban with Taliban. It surprises India that Saudi Arabia or Qatar despite having good relations are supporting and Turkey taking a strong position with resurgent religious feelings. Pakistan that was feeling run down by the US for giving preference to India would now not miss an opportunity to embarrass India.

 In the melee whatever the reason, the country got distanced with Iran, a friend for decades, loses rupee-petro deals and despite significant involvement in developing Chabahar port, a gateway to Central Asia, is now virtually left in the lurch. Iran even has its embassy open in Kabul along with Russia and China. Iran cannot be faulted. Now Taliban is a concern for it and Iran has to protect its interests.

 It would be a natural endeavour for India to reconnect with Iran. The relationships continued despite US sanctions. Sudden withdrawal by India was surprising for Iran too. India has to make efforts to renew the relationship. It would be useful for geopolitics as well as practical economic considerations. A better with Iran would help continue the access to Central Asia with which its business relations are strengthening.

Prime Minister Narendra Modi visited five countries in the region – Kazakhstan, Turkmenistan, Uzbekistan, Tajikistan and Kyrgyzstan – last year. An additional $1 billion line of credit to widen connectivity and energy sectors was issued and a business council was formed. At present, India’s commercial presence in Central Asia is led by public sector entities—Punjab National Bank and ONGC Videsh Limited (OVL) have operations in Kazakhstan. Private investments include the Sun Group, which operates the Yubileinoye gold mine in Kazakhstan, and companies such as KEC International Limited and Cosmopolitan Builders and Hoteliers Limited, which have executed projects in Tajikistan. The present flight detours and difficult land travels might affect the ties and business deals might become expensive.

That India is not friendless is testified by the safe passage it could arrange for its envoy diplomats and Indian nationals. Still it is a foreign policy setback and national security concern.

An immediate concern is whether its borders with Pakistan in Jammu and Kashmir would require mover investments to secure it or not, as J&K remains high on the mujahideen agenda. Taliban raiding the embassy in Kabul and consul office in Herat speaks volumes. India has to find out a balancing approach in dealing with Taliban as ostpolitic could not be an answer nor perhaps it getting involved in anti-Taliban western groupings as British Prime Minister Boris Johnson has already called for. Even distancing from it would not be easy as India has deeper financial and trade interests with the West.

The Afghan failure of the US is reflecting also on the dollar. This is adding to global inflation and it would create further troubles for India. Rising petrol prices, Reserve Bank of Indi pressure to reduce taxes on petroleum products and government revenue conundrum add to the crisis.

The Taliban takeover of Afghanistan will bear an adverse impact on India's bilateral trade with it, according to the Confederation of All India Traders (CAIT). Trade between the two nations amounted to $1.4 billion in 2020-21 and $1.52 billion in 2019-20. It has hit the Afghan traders also. Their exports for now are thawed and restoration depends on how situations normalise.

Confederation of All India Traders says that prices of some commodities may also go up in the Indian markets due to uncertainty over bilateral trade and relations with Afghanistan. Exports from India stood at $826 million whereas imports amounted to $510 million in 2020-21. The not so large volume of trade may not look monetarily important but strategically these help both the countries.

India’s significant contribution in its rebuilding and investments in Afghanistan too would be missed there. The fundamentalist regime is still poised against India as the ransacking of consular premises and kidnapping of many Indians from near the airport indicates. For now it is not an easy task to continue the operations.

India had an ambitious plan with the initiative of International North-South Corridor spanning Iran, Central Asia and Eurasia. It is supposed to emerge as a major connector with Modi’s concept linking the corridor to Kazakhstan-Turkmenistan-Iran rail link, now operational. It is also supposed to be linked to Chabahar and dedicated freight corridor having special economic zones on its land being built by India. The Chabahar-Sistan-Baluchistan-Central Asia/Afghanistan route till recently was considered less risky than the high-risk provinces of the Khyber Pakhtunkhwa and Baluchistan. With changing political scenario this too is likely to become difficult.

Is China outsmarting India with its “one belt, one road” move? Its continued consular presence in Afghanistan speaks volumes. China is becoming a tough contender not only at the borders but also at the international business arena. China is now the largest trade partner of Kazakhstan and Turkmenistan, the second-largest trade partner of Uzbekistan and Kyrgyzstan, and the third-largest trade partner of Tajikistan.  In 2013, Kazakhstan threw a spanner against sale of oilfields to OVL.

India has to work deftly to re-establish itself and outdo its rivals in and around Afghanistan to carry on its business and diplomacy in a tough world, where even the world bodies remain as mere spectators.---INFA

(Copyright, India News & Feature Alliance)