The share of India’s trade with Afghanistan is still meagre. However, there has been a considerable increase in the bilateral trade over the last 20 years to the extent that India is Afghanistan’s largest export partner. On the other hand, India is also reliant on Afghanistan for import of certain products like edible fruits & nuts. Here is a review of the trade data.
The recent Taliban takeover of Afghanistan has created ambiguity & apprehension at different levels. India being a key partner in the rebuilding of Afghanistan since 2002, has major stakes in the country. In an earlier story, we reviewed ‘India’s Investment’ in various development projects in Afghanistan. Apart from these investments, there are other areas that could have a considerable impact on India-Afghanistan relations. One such key area is India’s trade with Afghanistan.
India has not yet clarified its official stand on the Taliban as it continues to observe the recent developments and is keenly watching how the larger international community responds. As with the other aspects, there is uncertainty on the status of the trade with Afghanistan. As per recent news reports, there is a temporary stop on the imports & exports with India. The disruptions to the trade routes have had an impact on the trade activity. In this context, we look at the trends in India’s trade with Afghanistan over the years.
The value of India’s exports to Afghanistan increased by over 50 times over the last 20 years
As per the data available with the Ministry of Commerce & Industry’s Export Import Data Bank, there has been an exponential increase in the value of exports to Afghanistan compared to 20 years ago. The exports to Afghanistan constitute only a minute part of India’s overall exports but there has been significant growth in the last two decades.
For 2020-21, the total value of exports to Afghanistan was Rs. 6.1 thousand crores, lower than the Rs. 7.08 thousand crores in the previous year i.e., 2019-20. This was the first time since 2010-11 when there was a fall in the value of exports compared to the previous year. However, this needs to be viewed in the context of the COVID-19 pandemic.
While there have been minor flatulating trends over the years, the data clearly indicates the exponential increase in the value of exports over the last two decades. In 2001-02, the value of exports to Afghanistan amounted to only Rs. 116 crores. The situation was worse during the Taliban rule prior to the turn of the century.
As highlighted, despite the exponential increase in the value of exports, it still forms only a minor portion of India’s overall exports. In 2020-21, India’s exports to Afghanistan accounted for a meagre 0.28% of India’s overall exports. This, however, is a significant improvement from 0.06% of the total exports in 2001-02.
Apparels & Pharma Products among the major commodities exported to Afghanistan
Data indicates considerable year-on-year variation in the volume of commodities being exported to Afghanistan. Like in the case of man-made filaments, the total value exports to Afghanistan in 2019-20 was Rs. 1.74 thousand crores. This was the product with the highest value exported in that year. However, this is a singular spike in that year. Though this is one of the major export products, the value has been considerably lower in the years before and after. In 2018-19 and 2020-21, the value of exports has been almost a sixth of the 2019-20 value.
The same is the case with Sugar & Confectionery items. In 2020-21, the total value of exports was Rs. 1.34 thousand crores, which is considerably higher than the earlier years. Tobacco & its substitute products had one such spike in 2018-19.
Apart from these products which have shown a singular spike in specific years, Apparels & Pharma products rank among the products with a greater value of exports consistently over the years. Within the Apparel category, non-Knitted & crocheted products have a higher value of exports compared to the Knitted & crocheted products. Pharmaceutical products are consistently among the top products that are exported to Afghanistan.
The other top export commodities to Afghanistan include – Man-made Staple fibers, Iron & Steel articles, Coffee, Tea & spices along with Electrical Equipment & spares.
The share of imports from Afghanistan increased by 4 times in the last 20 years
As in the case of exports to Afghanistan, there is an exponential increase in the value of imports from Afghanistan over the past 20 years. Especially since 2003-04, there has been a consistent increase in the value of Imports.
In 2001-02, the total value of imports from Afghanistan was around Rs. 84 crores. This increased to Rs. 662 crores in the next 10 years by 2010-11. In the last 10 years, the value of imports has further increased with more than a five-fold increase between 2011-12 and 2020-21.
During 2020-21, the total value of imports from Afghanistan was Rs. 3.75 thousand crores. Despite this increase in the total value, the imports from Afghanistan are still only a meagre 0.13% of India’s total imports as is the case with India’s exports to Afghanistan. However, there has been a sharp increase in its share over the years.
In 2001-02, the imports from Afghanistan constituted only 0.03% of the total imports to India. By 2020-21, the value has increase 4-fold to 0.13% of India’s total imports. The increase in the share of imports is more prominent in the last five years.
‘Edible Fruits & Nuts’ comprise the major share of imports from Afghanistan
For the year 2020-21, the imports under the category ‘Edible Fruit and Nuts, Peel or Citrus Fruits or Melons’ comprised nearly 64% of the total value of imports from Afghanistan. Over the years, there has been a consistent increase not only in the value of the total imports under this category but also in its share in the overall imports from Afghanistan.
In fact, Afghanistan ranks next only to the USA in terms of the value of imports to India under this category. Out of the total value of imports under ‘Edible Fruit and Nuts, Peel or Citrus Fruits or Melons’, imports from Afghanistan make up for 10% in 2020-21. Within this category, the major share is of Dates, Figs & other fruits (HSC 0804) along with Grapes- Fresh or Dried (HSC 0806).
The other major commodity imported from Afghanistan is ‘lac, gums, Resins & Other Vegetable Saps & Extracts’. However, over the last five years, there is a fall in the value of imports under this category. Of the total imports, the decrease in the value of lac & gums is substituted by Coffee, Tea, Oilseeds, Vegetables & roots etc.
Efforts by both the countries to increase Bilateral Trade
As the data indicates, the value of trade with Afghanistan forms only a minor part of India’s overall trade. However, in the case of Afghanistan, India is among its largest trading partners. As per World Bank’s data, exports to India constituted 47% of the total exports of Afghanistan in 2019, making India the largest export partner of Afghanistan. In the case of imports, India is the 8th largest import trading partner of Afghanistan. These numbers highlight the importance of trade with India for Afghanistan.
Even for India, while the overall trade value with Afghanistan is less, it is a key source for certain products (fruits & nuts) as highlighted earlier. Recent news reports highlight India’s reliance on Afghanistan for dry fruits and other similar products, which could affect the market here and increase the prices in the domestic market.
The increase in trade with Afghanistan over the years is a result of multiple initiatives over the last twenty years. A few of them include:
- A dedicated Air-free corridor launched in June 2017, to overcome the challenge of transit via Pakistan.
- Operationalization of Chabahar Port since December 2017.
- Indo-Afghanistan Trade & Investment shows.
These initiatives have begun to show results in improving the bilateral trade between Indian & Afghanistan. However, with the recent developments, there are question marks over the direction of future trade relations with Afghanistan. While India is not overly reliant on Afghanistan for certain products in the short term, it could be a challenge for Afghanistan if the trade with India is affected considering that India is its major export partner.