A mixed report card for the India-Middle East-Europe Corridor

The India-Middle East-Europe Corridor (IMEC) was announced in September 2023 during the G20 summit in New Delhi, marking a significant step towards enhancing global trade connectivity. The corridor aims to reduce transit times and costs by 40% and 30%, respectively, compared to the traditional Suez Canal route. While the corridor promises to be a game-changer for international maritime trade, progress on the project has been delayed due to geopolitical tensions in the West Asian region, particularly the ongoing conflict between Israel and Palestine.

Geopolitical Challenges and Delayed Progress

• Impact of West Asian Conflict: The normalization of Arab-Israel relations, a critical component for the successful implementation of IMEC, has been disrupted due to the Israel-Palestine conflict. This geopolitical crisis has caused delays, particularly in the northern part of the corridor, which involves key stakeholders like Saudi Arabia and Jordan.
• Slower Northern Implementation: Given the diplomatic complexities and political sensitivities, work on the northern leg of the IMEC is expected to proceed at a slower pace until the security situation in the region stabilizes. This will delay the full realization of the corridor’s potential.
• Strategic Importance of the Project: Despite these setbacks, the IMEC remains a highly significant project, especially for global trade routes, as it promises to reduce shipping time and costs, positioning the corridor as a key alternative to the Suez Canal.

Progress on the Eastern Leg and India-UAE Cooperation

• Growing India-UAE Trade: On the eastern leg of the IMEC, there has been significant progress, particularly in bilateral trade between India and the UAE, which has grown by 93% from 2020 to 2023, driven by the Comprehensive Economic Partnership Agreement (CEPA).
• Non-Oil Trade Expansion: The shift towards non-oil trade between India and the UAE has strengthened the corridor’s role in fostering diversified trade. This trade expansion is crucial for India’s broader goals to increase its exports via the IMEC.
• Virtual Trade Corridor: The launch of the Virtual Trade Corridor between India and the UAE aims to streamline cross-border trade processes, reducing administrative and logistical costs. This initiative is a step toward creating a model for facilitating trade across all IMEC participant countries.

Future Prospects and India’s Role in IMEC

• India’s Port and Logistics Development: India has the opportunity to use the delays in the northern leg of the IMEC to enhance its port infrastructure and domestic logistics. Streamlining logistics and improving the digital footprint in the sector will make Indian exports more competitive.
• Integration into Global Supply Chains: The full benefits of the IMEC will be realized only if India can strengthen its manufacturing sector and enhance its integration into global value chains. This is essential for India to become a viable global supply chain alternative.
• Need for an IMEC Secretariat: To ensure the smooth functioning of the project, an IMEC Secretariat should be established to coordinate activities, streamline trade, and provide empirical data on the benefits for participating countries. This could also encourage other nations to join the corridor.

Practice Question:

Q. Discuss the challenges and opportunities posed by the India-Middle East-Europe Corridor (IMEC) for India’s trade and connectivity strategy. How can India leverage its role in the corridor to strengthen its position in global supply chains?