Indo-Afghan Trade and Investment
India recognizes the preeminence of Afghanistan as a junction of trade routes between central, south and west Asia for 3000 years. The bilateral trade at USD 683.02 million for 2013-14 (US$ 474.25 million export and US $ 208.77 million import by India) and $ 684 million for 2014-15 ($422 million export and $ 262 million import by India) is a modest figure going by the actual potential. However, the trade relations can realize its true potential if the Wagah - Attari route is opened for bilateral trade with Afghanistan. So far, the Afghanistan Pakistan Transit Trade Agreement (APTTA) has been restrictive in this aspect. India after Pakistan is the major export destination of Afghanistan. One of the objectives of building Zaranj-Delaram road by India was to boost bilateral economic relations besides offering Afghanistan another outlet to Sea port. The successful operation of the Chabahar port in Iran could capitalize on this road to offer a new transit route of Afghan products to India while opening a new route for India, and the rest of the world, for trade with Central Asia.
India and Afghanistan signed a Preferential Trade Agreement in March 2003 under which India allowed substantial duty concessions, ranging from 50% to 100%, to certain category (38 times) of Afghan dry fruits. Afghanistan in turn has allowed reciprocal concessions to Indian products, including tea, sugar, cement and pharmaceuticals. In November 2011, India removed basic customs duties for all SAARC LDCs at the SAARC Summit in Male which gave all products of Afghanistan (except alcohol and tobacco) duty free access to Indian market. Afghanistan (as LDC) is signatory to SAFTA and is required to lower its tariffs of all goods not on its sensitive list of 5% or less. This decade-long process helps avoid any sudden or dramatic reductions in tariffs and eases the changes with minimal disruption to Afghan industry. Afghanistan recently reduced its sensitive list from 1,063 tariff lines to 850 out of roughly 6,000 total tariff lines. Only 30% of the tariff lines on Afghanistan’s sensitive list have tariff rates above the requisite 5%. Under Afghanistan’s sensitive list, the highest tariff rates are applied on fruits, vegetables and nuts, basic construction materials, beverages, plants, articles of leather and carpets. Some other items that are not produced in Afghanistan are also subject to higher tariffs for revenue collection purposes such as tobacco, ceramic products, perfumery, minerals and fuel.
Transit is a major bottleneck in Indo-Afghan trade due to denial of export of Indian goods via Wagah border and delays at Karachi port. Most of the trade occurs via Bandar Abbas port in Iran or through Dubai. Earlier Banks/Insurance companies were refusing to provide their services via Bandar Abbas port due to US sanctions but after lifting of sanctions now the situation may change. Many Indian companies are engaged in the infrastructural development of Afghanistan and are contributing in the development of the country.
In the recent times, there are quite a number of visits by business delegations of both the countries to each other’s country. The important Afghan/Indian Trade/Business delegations that visited India/Afghanistan in the recent times are: