Taliban seals Pakistan border, what will be the effect on trade relations with India?

Posted on 19th Aug 2021 by rohit kumar

After the Taliban's capture of Kabul, the most feared trade with India was being raised. Now it seems to be happening in reality. India has said that the Taliban has stopped cross-border trade with it.

 

India's trade transactions with Afghanistan, which are surrounded by plains, mainly pass through Pakistan. This road trade between the two countries has now come to a standstill.

 

The Federation of Indian Export Organization (FIEO) has said that the movement of vehicles has now been stopped, due to which the import and export of goods worth millions of dollars has stopped.

 

Ajay Sahai, director-general of the Federation of Indian Export Organizations, told the BBC: "The Taliban has sealed the Pakistan border with Afghanistan. Most of the imports from Afghanistan come through the transit route of Pakistan. At present, that route is closed. is not opened. Trade is closed from that border. Exporters are worried. They are in a state of confusion."

 

"At present, the situation is worrying. We are monitoring the situation," he said.

 

Afghanistan's export partner

 

Afghanistan's exports account for 20 percent of its GDP. That is, one-fifth of the economy of Afghanistan is dependent on its exports. Carpets and rugs account for 45 percent of its total exports. It is followed by dry fruits (31 percent) and medicinal plants (12 percent).

 

If we talk about the countries which are the largest export partners of Afghanistan, then Pakistan (48 percent of total exports) ranks at the top. After this, India (19 percent) is at number two, and Russia (9 percent) is at number three. Other partners include Iran, Iraq, and Turkey.

 

Bilateral trade of more than 10 thousand crores

India has been Afghanistan's biggest ally during the last 20 years. India has invested lakhs of rupees in the development of dams, schools, and roads there. The building of the Parliament of Afghanistan is also a gift of India.

 

India is also Afghanistan's second-largest ally (after Pakistan) in terms of exports.

 

Bilateral trade between India-Afghanistan last year (2020-21) was $ 1.4 billion i.e. about Rs 10,387 crore, while in the financial year of 2019-20, there was a trade of $ 1.5 billion i.e. about Rs 11,131 crore.

 

In 2020-21, India had exported about Rs 6,129 crore and imported products worth about Rs 37,83 crore.

 

At the same time, in the financial year 2019-20, India exported Rs 7410 crore from Afghanistan and Rs 3936.87 crore was imported.

 

After the fall of the Taliban government in 2001, Afghanistan was open to international trade.

 

After this, during the last 20 years, the economy of Afghanistan was dependent on international aid and India became a major partner country.

 

Along with investment in many projects there, the business partnership between the two countries also took place on a large scale.

 

We can see from these figures how much the trade between the two countries has increased.

 

Between 2015-16 and 2019-20, Afghanistan saw an 89 percent increase in exports from India, while imports into India grew by 72% during the same period.

 

What does India buy from Afghanistan?

Europe and Asia account for 80 percent of the world's imported dried fruits, walnuts, and almonds. Between 2006 and 2016, global imports of dry fruits, walnuts, almonds doubled.

 

Its biggest importers in Asia are China, India, and Vietnam, which have seen rapid economic growth during the past decade and a half.

 

However, Afghanistan is not one of the world's largest exporters of dry fruits. But India is one of the largest importers of dry fruits in Afghanistan.

 

Ayaz Sahai, Director General of FIEO, says, “More than half of the products we import from Afghanistan are dry fruits. Some are fresh fruits. Some are spices, we also buy some onions. By closing the borders, if any product is affected If it can have an effect, then it is a dry fruit.

 

The list of dry fruits that can be bought from Afghanistan is long. From there India imports almonds, walnuts, raisins, figs, pistachios, pine nuts, dried apricots.

 

Fresh fruits include apricots, pomegranates, apples, cherries, cantaloupe, watermelon, and many medicinal herbs imported from Afghanistan. Apart from this, asafoetida, cumin, and saffron are also imported from there.

 

According to a report by the International Trade Center on Afghanistan's export strategy, India is one of the largest importers of dry fruits in the world.

 

In terms of importing dry fruits, India is at number four after America, Germany, and Hong Kong. A large quantity of dry fruits imported into India comes from Afghanistan.

 

impact on exports

Medicines, tea, and coffee are the main things that India sells to Afghanistan. Black pepper and cotton are exported from India.

 

Ajay Sahai says, "Most of our exports go through Iran, some also go from Dubai. Exporters are worried. They are in a state of confusion. Those who have some time to wait for delivery are delaying a little bit. In some cases, importers from Afghanistan have also asked producers to wait for a while to send shipments."

 

He said that traders are being advised to take credit insurance as it may have an impact in the coming days.

 

He says, “Exporters are being advised to take credit insurance if they have to deliver in Afghanistan. Looking at the current situation in Afghanistan, what kind of restrictions are imposed on payments, what will be the banking facilities, what will be the business. What kind of restrictions are imposed, it is not known. So for the time being we are monitoring it. But whenever a situation like this arises, it has an impact on business for a few days."

 

He says, “Since a very small part of the exports from India goes to Afghanistan, the quantity is not big enough to affect the market. Yes, it can have an impact on an individual exporter, but in India, there is a need for a single exporter. It is not possible to have a direct impact on the sector."

 

However, Sahai also says that whenever imports from any source stop, prices go up in speculation, and if trade relations are closed, then it will affect the prices of dry fruits.