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As international trade continues to be rattled by sustained Russia-Ukraine war and the widening conflict in the West Asia region, Finance Minister Nirmala Sitharaman in her Interim Budget speech Thursday reiterated that India-Middle East-Europe Economic Corridor (IMEC) will prove to be a strategic and economic game changer.
Sitharaman’s stress on IMEC, a plan to integrate India, West Asia, and Europe, comes at a time when the maritime corridor between Asia and Europe through the Red Sea shipping route is facing massive disruptions forcing global shipping lines to take a longer and more expensive route via the Cape of Good Hope, hurting Indian exports to Europe.
However, widening conflict in the West Asia region poses a problem for IMEC that has been dubbed as a counter to China’s ambitious Belt and Road Initiative (BRI) as Jordan and Israel, which had to play a crucial role in building the required infrastructure, are at loggerheads due to Israel-Hamas war.
“Geopolitically, global affairs are becoming more complex and challenging with wars and conflicts. Globalisation is being redefined with reshoring and friend-shoring, disruption and fragmentation of supply chains, and competition for critical minerals and technologies. A new world order is emerging after the Covid pandemic,” Sitharaman said.
“The recently announced India-Middle East-Europe Economic Corridor is a strategic and economic game changer for India and others,” she added.
Quoting Prime Minister Narendra Modi, she said that the corridor will become the basis of world trade for “hundreds of years to come, and history will remember that this corridor was initiated on Indian soil”.
Indian companies use the Red Sea route through the Suez Canal to trade with Europe, North America, North Africa, and parts of West Asia.
Rating agency Crisil said that these regions accounted for 50 per cent of India’s exports worth Rs 18 lakh crore and 30 per cent of imports worth Rs 17 lakh crore last fiscal.
“The current conflict in the Middle East will delay IMEC in the short term given that the attention of the Middle East focus is currently on the dispute between Israel and Palestine and the European Union’s attention is on Russia-Ukraine conflict. Further, with 2024 being an election year not only in India but in almost 50 countries, the political and economic tensions will play a role as well,” Sanjay Notani, partner, Economic Laws Practice, said.
