India's trade ties with Afghanistan set for robust growth
Afghan government seeks closer trade relations with India to take bilateral trade beyond the $1.5 billion zone.
With more than 20 years and $3 billion worth of investment in projects such as dams, roads and trade infrastructure, India has a lot at stake in Afghanistan.
The 2011 India-Afghanistan Strategic Partnership Agreement recommitted Indian assistance to help rebuild Afghanistan’s infrastructure and institutions; education and technical assistance for capacity-building in many areas. Those efforts also led to broader global investments in Afghanistan and provided duty-free access to the Indian market – with bilateral trade now worth $1.5 billion.
Sensitive time for transition
“No part of Afghanistan today is untouched by the 400-plus projects that India has undertaken in all 34 of Afghanistan’s provinces,” Dr S Jaishankar, Indian External Affairs Minister, said at the Afghanistan Conference in Geneva in November 2020.
Which is why the Afghan government seeking even closer trade relations with India at this sensitive time in its transition is welcome news for everyone.
According to Muhammad Suleman Kakar, the Afghanistan consul general in India, the country has opened investment opportunities for the Indian private sector and increased the possibility of an economic engagement with the state of Andhra Pradesh. In a virtual meeting with president of Federation of Andhra Pradesh Chambers of Commerce and Industry CV Atchut Rao, Kakar invited businessmen from the state to explore opportunities in the fields of agriculture, manufacturing and import/export in the landlocked country.
Building vital infrastructure
From an infrastructure point of view, India built vital roads, dams, electricity transmission lines and substations, schools and hospitals and so on. India’s development assistance is now estimated to be worth well over $3 billion.
According to Kakar, the vast scope for business expansion and cultural activities comes as a lucrative opportunity for both sides against this backdrop, and a deal with Afghanistan Federation of Chamber of Commerce may be reached upon for serious business transactions between the countries. “The opening of an Afghan Mission in Hyderabad is an important step towards the enhancement of trade between the two countries,” he said.
As per senior officials from the DGFT and FIEO, the potential of the India-Afghanistan bilateral trade, which now is around $1.5 billion and with much of it coming by way of exports from India, is certainly worth a more dramatic expansion.
The export basket from Afghanistan is dominated by dried figs, asafoetida, raisin, saffron caraway fennel and onion. The top five items that India exports to Afghanistan are textile, sugar, transmission towers, tobacco and medicines. Meetings on ‘Invest in Afghanistan’ business series have so far focused on healthcare, pharmacy, agri-business, infrastructure and information technology, and were aimed at building on the strong historical and cultural links between both the countries.
The growth in trade value between the two countries has consistently improved over the last five years. As a comparison, Indian exports to Afghanistan witnessed a growth of more than 89% between 2015-16 and 2019-20. Similarly, India’s imports also grew by 72% during the same period. In 2019-20, the export value increased by 39% and imports over 21% compared to 2018-19.