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Exporters Dilemma: Afghanistan Predicament Expected to Affect Trade with India

05 August 20224 mins read by Angel One
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A Brief Overview

In the past few weeks, as the United States of America has sought to withdraw from the mineral-rich country of Afghanistan after a period of 20 years, the Taliban has strengthened its stronghold on the country and now seeks to reign supreme.

Set against this backdrop, the political future of the country looks bleak which in turn implies an uncertain future for its trade with India.

Ajay Sahai, the Director-General of the Federation of Indian Export Organisation (or FIEO) therefore feels that the country’s exporters should be careful with their payments. He further stated that sufficient credit insurance could be availed of by them.

India and Afghanistan’s Trade Relations

India and Afghanistan have previously maintained cordial relations in terms of their export and import handovers.

Afghanistan’s exports that have been welcomed by India include their dry fruit and nuts ranging from walnuts, figs, and pine nuts to dried raisins, dried apricots, pistachios, and dried cherries. Their fresh fruit which has included cherries, watermelons, pomegranates, and apricots has been equally well met. Medicinal herbs too, have also been favoured by the Indian market.

When examining India’s exports to Afghanistan, staples including tea, coffee, cotton, and pepper have been in demand. However, with the Taliban takeover presently in effect in Afghanistan, trade relations between the two countries are expected to be impacted with a reduction in goods being brought in and sent out. Despite the bilateral trade relations expecting a decline, there is hope and belief that Afghanistan will continue to need products from India owing to which exports might continue.

Other Pertinent Information

Afghanistan’s President Ashraf Ghani fled the country hours prior to the Taliban gaining control of Kabul, the country’s capital which is home to the presidential palace, and which is now a Taliban stronghold. Kabul is also home to the Hamid Karzai International Airport which is one of the country’s five international airports.

Owing to the fact that Afghanistan is a landlocked country, air routes are the primary medium via which exports are shuffled into the country. Now, with uncertainty pertaining to the Afghan airspace as citizens seek to flee the war-torn nation, trade remains a secondary issue. It is likely to only resume once the situation settles down.

According to Arvind Goenka who serves as the Chairman of the Plastics Export Promotion Council of India (or PLEXCONCIL), private planes are set to become key players against this backdrop. This is owed to the fact that they will be required to establish relationships with third countries in order to export to Afghanistan.

Exporter to Afghanistan, Rajiv Malhotra, owner of Sai International believes that issues pertaining to timely payments would prevent Indian exports from being sent to Afghanistan.

The bilateral trade relations that India and Afghanistan have previously shared have amounted to USD 1.4 Billion for 2020 – 2021 whereas they amounted to USD 1.52 Billion for the period of 2019 – 2020. Indian exports amounted to USD 826 Million set against imports that amounted to USD 510 Million in totality for the period of 2020 – 2021.

Concluding Thoughts

The political, social, and economic future for Afghanistan now looks bleak. Although the Taliban claim to be more accepting of societal advancements they still appear to have not changed their strict religious outlook that is more extreme than it is acceptable. Trade relations with the country will likely only resume once the political unrest in the country settles down.

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