India’s Trade Strategy: EU FTA & Central Asian Ties
By Business Desk
India pursues a dual trade strategy: a Free Trade Agreement with the EU and enhanced connectivity with Central Asia, diversifying markets and boosting economic influence.
India is meticulously advancing a multi-vector trade strategy, simultaneously pushing for an expedited Free Trade Agreement with the European Union and deepening crucial economic linkages across Asia. This two-pronged approach underscores a broader geoeconomic calculus aimed at diversifying market access and enhancing regional influence, moving beyond mere transactional exchanges to structural integration.
The impetus for the India-EU Free Trade Agreement has gained considerable momentum following Commerce Minister Piyush Goyal’s recent tour of Europe. Such agreements are foundational mechanisms for market expansion, offering Indian exports preferential access to one of the world’s largest economic blocs, thereby structurally altering trade flows and boosting manufacturing competitiveness.
Strategic Connectivity in Central Asia
Concurrently, Afghanistan is actively seeking to bolster its trade and investment ties with India, recognizing India as its third-largest export destination. The Afghanistan Chamber of Commerce and Investment (ACCI) has explicitly called for streamlined visa processes, direct flight connectivity, and the resolution of banking sector impediments to facilitate smoother bilateral commerce. These operational adjustments are critical enablers for unlocking the full potential of regional trade.
Afghanistan’s strategic geographic position as a natural transit hub between Central and South Asia forms a key component of this pattern. In 2020, approximately 50% of Afghanistan’s total exports to India were routed via Pakistan, highlighting the existing, albeit constrained, logistical dependencies. This dynamic underscores the structural challenges and opportunities inherent in regional trade pathways.
Bilateral trade between India and Afghanistan stood at $1.5 billion during the 2019-20 period, with projections indicating a rise to $2 billion by 2025-26. This anticipated growth reflects underlying economic complementarities and a deliberate push towards greater integration. A pivotal enabler for this strategic connectivity is India’s ongoing involvement in Iran’s Chabahar Port, which provides Afghanistan with a vital sea route, circumventing traditional land-based transit challenges through Pakistan.
Furthering these objectives, plans are underway for joint trade exhibitions, designed to foster direct business-to-business interactions and identify new avenues for collaboration. These initiatives collectively illustrate India’s methodical approach to building resilient trade corridors and leveraging infrastructure projects to underpin a more integrated and strategically aligned regional economy.