Connecting India and Europe: The Race to become the New Silk Road.
The EU is India's largest trading partner, accounting for €124 billion worth of trade in goods in 2023 or 12.2% of total Indian trade, topping the USA (10.8%) and China (10.5%). The EU is the second-largest destination for Indian exports (17.5% of the total)
India exports Textile, Pharmaceuticals, Electrical Equipment, Machinery, Agricultural produce and much more to Europe. There are two ways by which Indian goods reach Europe. First is the Cape Route, which involves circumnavigating Africa and is an exhausting journey. An alternative route is available through the Suez Canal, which considerably reduces travel time; however, this passage is located in a geopolitically sensitive region and entails fees payable to Egypt.
Trade is projected to grow in the coming years and decades, sparking a race to connect Europe and India. This also benefits the Middle Eastern countries that lie between these two regions.
India Middle-East Corridor
A major initiative was taken an the G20 summit last year with the introduction of the IMEC (India Middle-East Corridor).
The IMEC outlines a trade corridor between India, UAE, Saudi Arabia, Jordan passing through Israel and finally landing in Europe. This also explains the Adani takeover of the Haifa port in Israel and the multiple connectivity projects between the Middle eastern countries. At a single glance it is understood that this is an enhancement of existing trade and will only strengthen existing trade ties.
The IMEC outlines a trade corridor connecting India, the UAE, Saudi Arabia, and Jordan, passing through Israel and ultimately reaching Europe. This initiative also highlights the strategic acquisition of Haifa Port in Israel by Adani, alongside numerous connectivity projects among Middle Eastern countries. Overall, it’s clear that this initiative will improve existing trade routes and help strengthen trade relationships in the region.
Both UAE and Saudi Arabia have excellent trade relations with India. Particularly,UAE is the largest trading partner of Jordan and has had positive relations with Israel ever since the signing of the “Abraham Accords” in 2020. This initiative benefits everyone involved. Oil-producing countries become key players in global trade beyond oil, India gains better access to a valuable trading partner, and Europe reduces its reliance on Chinese goods.. But trade doesn’t happen by drawing lines on a map it requires investment in infrastructure, logistics and a security understanding between the countries.
For the successful realization of this economic corridor, it is essential for Saudi Arabia to establish diplomatic recognition of Israel. The Kingdom's longstanding position of not recognizing Israel until Palestinian statehood is achieved presents a significant challenge to this initiative. This situation has been further complicated by the ongoing conflict in Gaza, which underscores Saudi Arabia's commitment to advocating for Palestinian rights and sovereignty.
International North–South Transport Corridor(INSTC)
Next we have the International North–South Transport Corridor(INSTC) connecting India, Iran and Russia. This corridor has taken importance after Russia’s “special military operation” into Ukraine cost its trade relationship with European and Western partners. This initiative was signed in 2002 and was cemented the trade relation between India and Iran with India gaining control of the Chabahar Port and with goals of developing it into a ‘deep-sea’ port taking load of the Iran’s busiest port,the Bandar Abbas Port. Significant infrastructural projects have been undertaken for this economic corridor such as the construction of roads and railway lines in, Kazakhstan–Turkmenistan-Iran railway link, the inaugration of the Astara port, Iranrud Trans-Iranian canal. This challenge that this corridor faces is the economic sanctions levied by the US on Iran and Russia which makes it challenging for Indian companies to trade with the Iranian and Russian counterparts, although concessions have been made for the energy imports from Russia.
Iraq Development Road
Iraq has proposed its own project name the “Iraq Development Road” making use of its geography as it sits right in the center of the Middle-East connecting the goods travelling from the Strait of Hormuz to Türkiye, which sits at the base of Europe. The proposed goal is to have a 1200km road connection along with a parallel railway lines to transport the goods,kickstarting the Iraqi economy with infrasttucre and increasing connectivity. a highlly ambitious plan estimated to be around 17 Billion Dollars,if succesful can bring immense benefits to not only iraq but to the wider middle east itself,as whatever happens in Iraq has ripple effects in its neighbouring coountires as well.
This begs the question which trade route or economic corridor is ultimately going to be succesful?
This. Only time will tell. But what is certain is that manufacturers in India along with import export partners in India are the ultimate winners. The construction and logistical companies working on these ambitious projects are also huge benefactors of these economic corridors.
The conditions are ripe for India to be a manufacturing hub of both agricultural and industrial goods. What remains to be seen is if the right seeds are planted and sustainable growth is maintained for effective economic development.