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No-Win Trade Prospects

While Indian imports from Afghanistan have taken a serious hit, exports from India too are suffering after the Taliban took control of Afghanistan.

By Hamid Sultan Dawoodi | November 2021


The arrival of the Taliban government in Afghanistan has created a severe threat to Indian trade, as millions of dollars worth of its products were exported there, whereas large quantities of different products were also smuggled into Pakistan through the border or via Dubai. These included silk cloth, betel leaf, tea, hardware, medicines, spices, auto parts, tyres, electronic products, etc. Apart from losing the market by Indian traders, their billions of rupees debit amounts had been stuck there because most of the exports transactions were based on borrowed contract i.e., at sight payment.

In today’s world, the development of any country is not possible just by improving internal affairs. Improving external affairs is also a matter of time. The most important aspect in foreign affairs is relations with neighbouring countries. If we talk about Pakistan, on the one side it is Afghanistan, a war-torn country, and on the other it is China, the world’s largest trading power.

Due to changing geopolitical and regional dynamics, it is important the government should re-set its priorities and focus on emerging regional economies for trade and exports. Presently, through CPEC, China, the Central Asian States and East Asian countries have immense business potential for Pakistan and they should be given more focus for trade relations.

Afghanistan is a landlocked country and has always depended on the cooperation of Iran, India and Pakistan to develop its international trade links with the world through the Pakistan’s economic relations with Afghanistan passed through various stages after the creation of Pakistan. From 1947 to 1965 their economic relations witnessed ups and downs owing to political reasons but once it concluded the Transit Trade Agreement of 1965, their economic ties solidified despite all odds.

By concluding the Transit Trade Agreement of 2010, ties between Pakistan and Afghanistan further consolidated because now they became international trade partners. After 9/11, Pakistan provided financial and technical assistance to Afghanistan for its reconstruction, rehabilitation and development. It is a fact that Afghanistan is a fast up-and-coming market of strategic importance, and it is close to some of the fastest-growing and largest markets in the world. Strategically, it is located between the energy-rich, republics of Central Asia, and the major seaports in South Asia, providing a key transit route, for Central Asian oil and gas to markets in South Asia and elsewhee.


Many national and international companies are investing in Afghanistan right now and two major international hotels (Hyatt and Serena) have invested in the counrry. Leading international banks have opened their offices such as Afghanistan International Bank (AIB), the National Bank of Pakistan Jalalabad Branch, the Standard Chartered Bank and the Habib Bank Ltd.

Afghanistan’s location is such that it is not only called the gateway to Central Asia, but also the central point of the Great Game in the world. That is why big and rich countries like the USA, Russia, France, China and the UK want control over Afghanistan. Whenever India needs to expand its trade in Central Asia, it will need Afghanistan. If India makes the wrong decision in a hurry and its relations with the Taliban deteriorate, it may face difficulties in trade with Central Asia.

There was competition between Pakistan and Iran to attract Central Asia’s trade with Arabian Gulf countries to their respective ports. Iran offered to dedicate the port of Bander Abbas to Central Asian trade while Pakistan developed Gawadar, a port on the Balochistan Coast, with Chinese help. This competition benefited Afghanistan because all routes passed through Kabul. If only Afghanistan could offer good power, cold storage and other facilities, trade and custom revenues for Kabul would increase dramatically.

Demand for Pakistani products has multiplied since the change of government in Afghanistan. The biggest increase is in food demand. Demand for goods sent to Afghanistan has increased by 200%. The change in Kabul has brought new opportunities for Afghan importers and now more export orders are coming from Afghanistan. Although Pakistani exporters are receiving more orders from Afghanistan, the volume of bilateral trade between the two countries is not much and is limited to only two and a half billion.

It must be emphasized that the Taliban have taken over the government after 20 years of war and they will not allow any country to dominate them. In the current situation there is nothing in Afghanistan’s economy that Pakistan can gain by getting control there as the IMF/ World Bank has captured their billion-dollar assets. The GDP in Afghanistan is only 20 billion, of which 75% is foreign aid. Now that aid has stopped.

According to the NCIA, Afghanistan receives more than 500 items from Pakistan, including wheat, flour, rice, cooking oil, dried milk and live animals. Nasir Khan, who trades in foodstuffs with Afghanistan, said three-quarters of Afghanistan’s imports come from foodstuffs.

At present, Indian trade with Afghanistan has been paralyzed; however trade relations between Afghanistan and India are centuries old. The positive thing for India is that its balance of trade with Afghanistan has always been in its favour. In other words, India’s exports have exceeded its imports. It is considered better for any country and its economy to have more exports than imports.

If we look at the figures for 2021, we see that this year India has exported about $35, 835 million worth of goods to Afghanistan. The products included tea, coffee, sugar, spices, medicines, garments, cement and transmission towers. Its imports from Afghanistan - raisins, walnuts, almonds, pistachios and figs - are about 10,510 million dollars. India’s exports to Afghanistan exceed its imports and India is one of Afghanistan’s major trading partners. Now, if the transit route is reported to be closed, not only could India lose billions of dollars economically, but the risk prospects for the future could be doubled. Many projects and India’s TAPI gas pipeline through Afghanistan could also be jeopardized.

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