India and Afghanistan are strengthening their commitment to enhance trade and economic cooperation, forging closer ties through various initiatives and addressing existing hurdles. This renewed focus aims to significantly expand the bilateral trade volume and unlock new investment opportunities in key sectors.
Afghanistan's Minister of Industry and Commerce, Alhaj Nooruddin Azizi, recently concluded a five-day visit to India, during which he engaged in discussions with Indian government officials and business leaders. These meetings underscored both nations' determination to deepen their economic partnership, building upon their historical relationship. Azizi emphasized Afghanistan's readiness for deeper trade and investment ties with India, highlighting the country as "an excellent ground for investment".
One of the key outcomes of these discussions was the agreement to appoint dedicated commercial attaches in each other's capitals. This move is intended to provide crucial support and oversight for trade cooperation, facilitating smoother communication and problem-solving. M. Anand Prakash, Joint Secretary of the PAI Division, confirmed this development, emphasizing its significance in bolstering bilateral trade.
In addition to diplomatic efforts, practical measures are being implemented to improve trade routes and connectivity. India and Afghanistan are set to deepen trade ties through Iran's Chabahar port and new cargo flights from Delhi and Amritsar to Kabul. This strategy aims to bypass existing obstacles and enhance the efficiency of trade operations. Minister Azizi specifically requested scheduled shipping services from Chabahar, the construction of dry ports in Afghanistan's Nimruz province near the Iranian border, and smoother handling of Afghan cargo at India's Nhava Sheva Port in Maharashtra. The air freight corridor connecting Kabul–Delhi and Kabul–Amritsar has been reactivated, with cargo flights expected to begin shortly.
Both sides are also committed to resolving existing challenges that hinder trade and investment. These include issues related to business visas, banking channels, and air connectivity costs. Addressing these "minor hurdles" is expected to create a more favorable environment for trade and investment to flourish. Smoother financial links between Indian and Afghan banks are essential, with the need to revive interbank relationships so traders do not face obstacles.
India and Afghanistan are exploring opportunities in various sectors, including mining, agriculture, health, and textiles. Afghanistan has invited Indian companies to invest in its untapped mineral resources, including gold and lithium. To incentivize investment, Afghanistan is offering five-year tax exemptions for new industries, particularly those established by returning Afghan refugees, as well as a reduced tariff of 1% on raw materials and machinery.
In the textile sector, a high-level Afghan delegation met with officials from the Indian Ministry of Textiles to discuss expanding cooperation. Discussions focused on strengthening Afghanistan's textile ecosystem, generating employment, and improving training facilities for farmers. India, being the second-largest cotton producer globally, is well-positioned to provide expertise and support to Afghanistan's textile industry.
Furthermore, discussions have also covered expanding spice-related cooperation, increasing exports, and exploring joint investment opportunities. The Indian side expressed interest in setting up spice production factories in Afghanistan. Both sides agreed on an exchange of sectoral delegations, with Afghan spice sector officials visiting advanced spice factories in India and a delegation from India's spice sector traveling to Kabul.
These collaborative efforts signify a strong commitment from both India and Afghanistan to overcome challenges and unlock the full potential of their economic partnership. By addressing trade barriers, improving connectivity, and promoting investment in key sectors, the two nations are paving the way for a future of enhanced trade and economic growth. The goal is to restore trade volumes to their pre-2021 level of more than USD 1.8 billion by fully operationalizing the Chabahar Port route and simplifying customs and banking procedures.
