The Memorandum of Understanding (MoU) for the IMEC was announced during the G20 Summit in New Delhi in September, last year. The signatories include the US, UAE, Saudi Arabia, France, Germany, Italy and the European Union, in addition to India.
– By Darshan Ghodawat
Earlier this year, while presenting the interim budget for the year 2024, Union Finance Minister Nirmala Sitharaman stated that the India-Middle East-Europe Corridor (IMEC) would be a veritable game changer for India, as an emerging economic superpower. As she further pointed out, the proposed trade route will have lasting implications on all the geographies it impacts, and could pave the way for the emergence of a new global economic order. To better understand the weight of Finance Minister Sitharaman’s words, let’s understand the context of the proposed corridor and why it is being met with such enthusiasm across all quarters.
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The Memorandum of Understanding (MoU) for the IMEC was announced during the G20 Summit in New Delhi in September, last year. The signatories include the US, UAE, Saudi Arabia, France, Germany, Italy and the European Union, in addition to India. The signing of the MoU represents a united step forward towards meeting the burgeoning infrastructure needs of developing nations. The proposed multimodal corridor will comprise railway, ship-to-rail, and road networks across two routes — the East Corridor that connects India to the Arabian Gulf and the Northern Corridor that bridges the Arabian Gulf and Europe — which will supplement existing maritime routes. Further, it will also encompass an electricity cable, a hydrogen pipeline and a high-speed data cable.The IMEC is envisioned as a comprehensive transportation network that will improve efficiency, reduce costs and generate employment, which will also help the participating geographies to lower their carbon footprint.
A ripple effect across continents
India’s efforts to establish better connectivity to markets in the West, particularly in Europe, have been routinely jeopardised by Pakistan — since the 1990s, Islamabad has denied India overland access to the Middle East and Eurasia. Although India has attempted to circumvent this veto by reaching out to Iran to use the Chabahar Port to gain access Afghanistan, from thereafter entering Central Asia, Russia and Europe through the International North-South Transport Corridor, Iran’s deteriorating relations with the US, which is also India’s most important trade partner, brought this plan to a staggering halt.
The establishment of the IMEC will enable India to bypass both Pakistan and Iran, while strategically reconnecting with the Arabian peninsula. This augurs well for India’s renewed and significantly more enthusiastic outlook towards the Middle East, which has been fostered in no small part by the country’s deepening ties with the US which, under the Biden administration, has been rapidly rethinking its Middle East policy.
In addition to giving India a political upper hand in the power balance in the Middle East, the IMEC will open up several new avenues for growth and partnerships for the subcontinent. It will also serve as a countermeasure to China’s growing economic and political influence in the Middle East. However, it is vital to allay the concerns of neighbouring countries and political power brokers such as Egypt and Turkey. With Egypt’s strategic location making it a historically important ally to both Europe and the Middle East in terms of trade routes via the Suez Canal, the country’s reaction to the IMEC potentially undermining its dominance in the region must be factored in. Similarly, Turkey has also been a historically important regional power, and its concerns must be addressed as well.
Looking ahead, it is predicted that the corridor’s model could be replicated to link India to the African continent, thereby reinforcing India’s ties with African nations. Further, the development of Special Economic Zones (SEZs) along the East and Northern corridors will attract foreign investment and drive economic growth in the region.
Propelling India to the forefront
This historic and first-of-its-kind initiative places India at the forefront of a wealth of opportunities — the EU is India’s largest trading partner and second-largest export market, while the US comes in at second place in terms of trade and the latest export market for India. The IMEC will further facilitate India’s trade with these two markets, by safeguarding the country from the risk associated with the current route, which traverses the Red Sea. The corridor will make India a more attractive re-shoring hub, away from China, while reducing the transit time from India to Europe by roughly six days.
Additionally, the IMEC will also strengthen the country’s stake in renewable energy. The inclusion of electricity grids in the corridor will boost India’s use of solar power, while the clean hydrogen pipelines will propel India’s growth as a hub for green hydrogen-based power. Importantly, it will help India to maintain the resilience of its supply chains in the face of global disruptors, such as pandemic and geopolitical conflicts.
(Darshan Ghodawat is the CEO and Managing Director at AVA Global Logistics LLP.)
(Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.)
