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

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