What does the new trade route from India to Afghanistan via Chabahar port holds for the region

Where is Chabahar and why it is important ?

Chabahar Port is a seaport in Chabahar located in south-eastern Iran, on the Gulf of Oman.

Among other things Chabahar port acts as a gateway to central Asia for India, bypassing hostile Pakistan. Route through Chabahar and Iran opens up new opportunities for trade and transit from India to Afghanistan and other landlocked central Asian countries. 

A trilateral agreement on Establishment of International Transport and Transit Corridor was signed during the visit of Prime Minister Narendra Modi to Iran in May 2016. 

In June, 2017 India and Afghanistan had launched an air freight corridor between the two countries to boost trade.

The first consignment of wheat to Afghanistan left from Kandla port, Gujarat, on 29^th of October,2017. From Chabahar port the cargo will take the land route through Iran to Kabul. 

"The people of India, Afghanistan, and Iran have been connected through centuries; shared commonalities of art and culture,ideas and knowledge; language and traditions. Today, we are rejuvenating these connects and commonalities. I believe that this is the starting point of our journey to realize the full spectrum of connectivity," Sushma Swaraj, External Affairs Minister said while flagging off the shipment. 

Import and Export data

Here are some data:

Top five Export and Import partners: Data 2016

Exporter	Trade   (US$ Mil)	Partner share(%)		Market	Trade (US$ Mil)	Partner  share(%)
Iran, Islamic Rep.	1,265	19.36		Pakistan	283	47.5
Pakistan	1,199	18.35		India	230	38.57
China	1,093	16.72		Iran, Islamic Rep.	19	3.16
Kazakhstan	622	9.51		Turkey	12	2.04
Uzbekistan	399	6.11		Iraq	11	1.88

Source https://wits.worldbank.org

Imports by Afghanistan in last 5 years

Exports in last 5 years

Product Group-wise imports in 2016

India can pick up share of this pie, especially in Chemicals, Food Products, Footwear, Machinery and electrical, Metals, Plastic and Rubber, Textiles and Clothing and Transportation.

India is already involved in development of infrastructure in Afghanistan. With the alternate route now in place, a lot of inputs can be sourced from India.

Product Group-wise Exports in 2016

Potentials exist in sourcing raw materials and chemicals.

Limited SWOT analysis

Strength

• With GDP of USD 20 billion only and GDP growth rate at meager 2.20 %, Afghanistan's economy is set to explode. Afghanistan is getting International support both financially and otherwise to re-build its infrastructure.
• Largely credible and recognized stable democratic governments since 2005.
• Re-vamped Army and Security agencies.
• Trade with India was restricted due to transit problems. Chabahar port may provide the opening which India traders were looking for.
• Excellent relation with India.
• Untapped natural resources.

Weakness

• Ranking of ease of doing business is 183 of 190 in 2017 as per The World bank-IBRD IDA. A lot needs to improve.
• Lack of skilled and trained personnel.
• Factions and inter-tribal tensions.

Opportunities

• Despite Afghanistan being one of the poorest country in the world, geological surveys by USGS,  has revealed that there is a huge potential in mining of natural resources, including chromium, copper, gold, iron ore and lithium, worth billions of dollars. Exploration and extraction of coal, gemstones and marble are already in progress.
• Militia and warlords are by and large fragmented, hence better penetration possible.
• The involvement of India in the country's infra development.
• Trade with central Asian countries from Afghanistan.

Threats

• Decades of civil war in Afghanistan has ruined its infrastructure, administrative and education system.
• Large chunk of area still occupied by Taliban.

Conclusion 

By and large this new opening of trade route and connection to Afghanistan is something which can immensely benefit India. 

Vinay Pandey, 31/10/2017

PS : If you have a suggestion or have noticed a mistake, please leave a comment.

PESTLE Analysis - How does UBER India stands out

Uber India is the Indian arm of Uber, an international company headquartered at San Francisco, California, USA. Uber acts as an aggregator in taxi sharing business.

Uber India, is the second largest unit for the company and has recently crossed 500 million trips milestone. Employing over a thousand people across 29 cities ¹ and is growing at a phenomenal rate of over 100 % year-on-year ² and is actively expanding into smaller cities. It is also the second largest taxi aggregator in India after Ola.

Here is the PESTLE analysis of Uber India.

Political factors:

Uber from the very beginning has been facing scrutiny all over the world for not having clear regulations and bending rules in general. Many countries, including India has issued notice and taken action against Uber for employing taxis without commercial licences. It is also accused of not owing responsibility for accidents, incidents of crime and harassment by drivers under its umbrella. France, Netherland and some Asian countries has initiated steps to bring regulations in this regards.

Drivers were convicted of rapes in India in 2014 and 2017. Various states have issued stern warning to Uber for not following rules to ensure transparency and security.

Governments are also looking into price control mechanism to discourage Uber's dynamic pricing strategy.

Economic factors:

Uber is modeled on shared economy, wherein Uber acts as a bridge between vehicles owned by drivers and passengers. It connects potential passengers through a mobile app and transfers the request to the nearest driver, who drives to the location.

Introduction of ride hailing service caused a surge in private drivers, unemployed youth and those looking for new career opportunities, to invest in commercial vehicles, mainly drawn by initial reported earnings of around a lakh of rupees per month. The competition with Ola, its main competitor and economics of scales caused reduced incentives, taking the edge off the initial stimulation to join Uber. Having lost its sheen, both Uber and Ola are facing a huge deficit of skilled drivers to help them to be consistent in their business growth.

Driver unions and even the central government are contemplating to enter the market at a lower rate per kilometer than Ola and Uber. If successful, this can further dent the operations of private ride hailing services.

As a pre-emptive measure to ward off pressure of high fares, both Ola and Uber has started ride sharing options, wherein a passenger shares a ride with other passengers and pays less than half of regular fare. A win win situation for both passenger and Uber.

Break even revenue is still a dream for Uber India and its operation is funded by venture capital.

Socio-cultural factors:

Companies like Ola since 2010 and Uber since 2013, has caused a marked change in people’s mind-set.

In an era prior to ride hailing companies, consumers often found themselves helpless while trying to rent a taxi at night. Even during the day time un-organised taxis and auto-ricksaws held the general public to ransom, refusing rides, refusing to go by meter, demanding exorbitant fares and often behaving badly with women. Females tried to avoid late evening / night duties, causing professional loss to their careers. Late outing programs were mostly abandoned in absence of reliable transport. Late night arrivals at the rail station or airport were cursed. Citizens lacked better options and did not feel safe and secure in general.

Apart from bettering the lives of drivers who joined, these ride hailing services given its convenience and efficiency provided an avenue to the citizens to change their routine. Urban smart phone wielding commuters are able to plan and set up meets and families could go out together, without worrying about the haggles of travel. This directly influences occupancy of restaurants, late night cinema shows and higher footfalls at shopping malls and amusement parks. Offices could work longer enabling them to compete better. Train and flight travels to unknown cities are easier with ride waiting on arrivals, even at midnight. Bar goers booked rides, instead of driving in a drunken state.

Technological factors:

The exploding of operations of ride hailing services is mainly because of use of technology. Commuters just needed a smart phone to download and install the ride hailing apps from Uber. Register and one is ready to go.

With improvement came journey estimation, point to point travel, abuse reports, support system, transparency in statements and receipts.

With real-time tracking not only the commuter is able to check the route being taken; Uber too can keep an eye on the ride. Thus, adding to the safety quotient.

Digital money transfer system as Paytm, UPI, credit card and debit card boosted the ease of the commuter going cashless. The drivers too benefit from the new technology.

Legal factors:

As per report ³ as recent as 13th October, 2017, Supreme Court of India is to examine a plea to make ride hailing companies to be accountable for drivers’ offences. In another corner of the world, Transport department of London has imposed a ban and has decided not to renew its licence.

In India, ride hailing services were brought under the ambit of Service tax (and now GST) unlike other taxis.

In some states, government wants to regulate their fares and bring them at par with regular black-and-yellow cabs and reduce the demand driven prices.

Environmental factors:

Though it can be debated that ride hailing companies were responsible for increase in sales of mid-segment cars, the effect it caused on traffic congestion is still to be studied fully. One theory suggests that such services will reduce carbon emissions in cities by lessening the usage of personal automobiles as it takes away the incentive of owing a personal vehicle. People will tend to use public transport more if they have Uber as last mile connection or as a back-up in case they are not able to avail the same. Also, cars deployed by Uber are new and relatively more fuel efficient and less emission is expected.

Sustainable cars need to be one of the priorities. Both Uber and Ola are moving into e-cars and hybrid cars to reduce environmental damages.

Conclusion:

In conclusion, it may be said that Uber India is a big player in shared economy market, with options to branch into other revenue streams using the same infrastructure and plotting a survival and competition plan. UberEATS is one of its initiatives.

Bans and restriction is the biggest challenges it is facing. It needs to review its human management and stick to strict back-ground check while adding drivers to its fleet.

Uber in markets where it is falling short of expectation is merging its business with rivals. Yandex, Russia and Didi Chuxing in China took over operations of Uber. Similar merger or acquisition with Ola or Meru, another app based taxi service in India, cannot be ruled out in future.

Vinay Pandey, 29/10/2017

PS : If you have a suggestion or have noticed a mistake, please leave a comment.

References :

1. http://www.business-standard.com/article/companies/uber-india-witnesses-strong-growth-plans-to-double-driver-base-by-2018-117080301201_1.html
2.  http://www.livemint.com/Companies/VP4hwqdmLv3FRg0DV64hxO/India-business-growing-at-over-100-yearonyear-Uber.html
3.  http://indianexpress.com/article/india/ola-uber-supreme-court-to-look-into-plea-on-app-based-cab-services-4887790/