India-Middle East-Europe Corridor (IMEC): Mixed Report
STORIES, ANALYSES, EXPERT VIEWS
In September 2023, the ambitious transcontinental India-Middle East-Europe Corridor (IMEC) was announced. The proposed corridor is expected to reduce the transit time between its eastern and western nodes by 40%, and costs by 30%, compared to transportation via the Suez Canal. The new corridor, once operational, according to Afaq Hussain (Director, Bureau of Research on Industry and Economic Fundamentals, New Delhi) and Akhtar Malik (Head of Programmes at Bureau of Research on Industry and Economic Fundamentals, New Delhi) “will be a game changer for the international maritime trade.”
The West Asia challenge: uncertain western part of the corridor
The announcement of the corridor came with much optimism. However, “this did not last long, as the very premise which led to the conception of this idea, namely, the normalisation of Arab-Israel relations, came to a sudden halt with the escalation of the conflict between Israel and Palestine on October 7 last year. This crisis engulfed the whole of West Asia for the larger part of the year, which put the corridor on the back-burner. As a result of the temporary pause, two key stakeholders, Saudi Arabia and Jordan, have not been able to make any progress on the project. Though it may be argued that the official relations between Arab countries and Israel won’t impact completion of work on the ground, the two governments, which will have to work closely with the Israeli establishment for the project, would not want the optics and its geopolitical dimension. Therefore, implementation on the northern part of the corridor, which is mostly in West Asia, is going to move slowly until the ongoing escalation subsides.”
Things moving fat on the eastern leg of the corridor
On the eastern leg of the corridor connecting the United Arab Emirates (UAE) and Indian ports, however write the two authors “things are moving forward at a relatively fast pace. The economic relations of the two countries are on a northward trajectory, which is also reflected in the increasing bilateral trade numbers. Post the signing of the Comprehensive Economic Partnership Agreement (CEPA) in 2022, bilateral trade has grown from $43.30 billion in 2020-21 to $83.64 billion in 2023-24 (a staggering 93%). Another important feature of the growing bilateral trade is the diversification of the trade basket between the two countries, which is reflected in the growing non-oil trade. The non-oil trade between India and the UAE grew from $28.67 billion in 2020-21 to $57.81 billion in 2023-24. This represents a healthy shift from an Indian perspective, considering that most of these commodities will be transported further west and north through the IMEC, thereby improving India’s export share in the larger region.”
Beside, the ongoing streamlining of trade processes “would not only serve bilateral relations, but also pave the way and provide a working model for other countries involved in the IMEC to develop similar frameworks for cross-border trade facilitation.”
It is therefore, “clear that only the connectivity aspect of the IMEC initiative is gaining some traction at the moment. Other elements of the corridor, including clean energy export, undersea fiber-optic cables and pipelines, energy grid linkages, telecommunication lines, and clean energy technology cooperation, will have to wait till the situation in West Asia normalises…..”
India’s stakes
India, especially, suggest the two authors “can use this time to prepare its ports, develop specific economic zones along the connectivity nodes, and improve its domestic logistics for seamless integration with the IMEC. There is a need to improve the digital footprint in the domestic logistics landscape, which will help reduce logistics time and costs, thereby making Indian exports more competitive. Further, the corridor, as ambitious as it may be, is just the means. “The actual benefits will be seen only if India can improve its integration in the global value chains. With IMEC, India aims to position itself as a global supply chain alternative. This can only happen if the country takes steps towards enhancing its manufacturing competitiveness.”
