The India-Middle East-Europe Economic Corridor (IMEC), announced on the sidelines of the G20 summit in New Delhi, will be crucial for India’s ambitions to increase the share of exports in its economy.
The IMEC will be comprised of two separate corridors: the east corridor connecting India to the Arabian Gulf and the northern corridor connecting the Arabian Gulf to Europe.
This corridor will secure regional supply chains, increase trade accessibility, improve trade facilitation, and support an increased emphasis on environmental, social, and government impacts, according to the Memorandum of Understanding.
However, it’s the country’s exports that are likely to get a major boost.
Even though the timeline for the execution of the project will be decided over the next two months, it will take several years before the corridor can contribute significantly to the economy.
“For a corridor of this nature with several countries participating, it will be over a 10- to 15-year period before we can see the full fruits of the project. India would be a fairly large economy by that time, with a size between $5 and $10 trillion,” said Jagannarayan Padmanabhan, director of consulting at CRISIL Market Intelligence & Analytics. He also said that exports will be in the spotlight a lot more at that point.
In its Foreign Trade Policy released earlier this year, the government targets an increase in exports of $2 trillion by 2030.
The government will also rely on this corridor to achieve its target of bringing down overall logistics costs to single digits from 13–14% of the GDP currently. Lower logistics costs are expected to make Indian exporters more competitive in the international market.
The corridor will increase efficiencies, reduce costs, enhance economic unity, generate jobs, and lower greenhouse gas emissions, resulting in a transformative integration of Asia, Europe, and the Middle East, according to the MoU.
In an interview with NDTV, Railway Minister Ashwini Vaishnaw said the corridor is different from China’s Belt and Road Initiative.
“The BRI came with lots of conditions. It comes with tonnes of debt, putting the country into a debt trap. In contrast with that, (in) this project, each country can look at its own needs and, based on those needs and requirements, the project can then be designed,” he said.
The corridor includes a railway that will provide a reliable and cost-effective cross-border ship-to-rail transit network to supplement existing maritime and road transport routes.
Many multilateral institutions, including sovereign wealth funds and private equity firms, are willing to fund it, he added. “Transportation will bring so much revenue that it will be able to pay off without getting the host country into a debt.”
However, with few details out, the project is still a proposal. The big question of executing such an ambitious project with adequate funding and geo-political constraints still needs to be answered. Initial comments suggest the financial viability of projects will be kept in mind by individual stakeholders.
The varied interests of several countries increase the chances of successfully executing such a grand project, unlike the earlier efforts of China’s BRI or India’s International North-South Transport Corridor, where the majority of the burden was on a single country.
