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Bilateral Trade between
India and Afghanistan
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Paper Id :
18427 Submission Date :
2024-01-01 Acceptance Date :
2024-01-06 Publication Date :
2024-01-15
This is an open-access research paper/article distributed under the terms of the Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
DOI:10.5281/zenodo.10495394
For verification of this paper, please visit on
http://www.socialresearchfoundation.com/resonance.php#8
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Gagandeep Kaur
Assistant Professor
Department Of Economics
Guru Nanak College
Sri Muktsar Sahib,Punjab, India
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| Abstract
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India and Afghanistan are the developing
countries of the SAARC region. Foreign trade is a way to
improve the bilateral relationship between two countries. This connection goes beyond governmental interactions,
finding its roots in the historical exchanges between the people of both
nations. The Strategic Partnership Agreement, signed in October 2011, further
solidifies this relationship by outlining key areas of collaboration. This study has attempted to estimate India's bilateral trade
relations with Afghanistan in terms of volume, composition and direction of
trade. This study is based on secondary data for the period 2001-22. The study
has been found that at present, India's trade with Afghanistan is US$ 0.89 bn,
of which India’s export to Afghanistan are US$ 0.48 bn and India’s import from Afghanistan are US$
0.41 bn in 2022. It has been also found that India has huge trade potential
with Afghanistan. The study predicts India's exports, imports and trade for the
period 2001-22. It shows the increasing
trend of India's trade with Afghanistan during the study period.
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| Keywords
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Afghanistan, Composition of Trade, Direction of Trade, India, Trade Volume. |
| Introduction
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International trade plays a
crucial role in fostering economic growth by expanding domestic economies to
the global level. It contributes to economic prosperity through the
reallocation of resources and comparative advantages, thereby facilitating
overall economic development (Abendin & Duan, 2021). India and Afghanistan have a strong relationship based on
historical and cultural affinities. This connection goes beyond governmental
interactions, finding its roots in the historical exchanges between the people
of both nations. The Strategic Partnership Agreement (SPA), signed in October
2011, further solidifies this relationship by outlining key areas of
collaboration. Under the SPA, there is a commitment to assisting in the
reconstruction of Afghanistan's infrastructure and institutions. India also extends
support in the form of education and technical assistance to enhance indigenous
Afghan capabilities across various sectors. Additionally, efforts are made to
encourage investments in Afghanistan's natural resources. To promote economic
ties, India grants duty-free access to the Indian market for exports from
Afghanistan. The agreement emphasizes a commitment to an Afghan-led,
Afghan-owned, broad-based, and inclusive process of peace and reconciliation.
India advocates for sustained and long-term international commitment to
Afghanistan. Regular high-level exchanges characterize the diplomatic ties
between the two nations, underscoring the importance both countries place on
maintaining a strong and enduring relationship (Ministry of External Affairs,
2017).
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| Objective of study
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1. Analysis of
trends of volume of trade between India and Afghanistan. 2. To analyze
the balance of trade, composition of trade and direction of trade. 3. To suggest
policy measures that would strengthen Indo-Afghanistan trade relations.
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| Review of Literature
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In
essence, the India-Afghanistan relationship is comprehensive, spanning
economic, political, and cultural dimensions. The strategic partnership and
collaborative initiatives reflect a shared commitment to mutual development and
regional stability, positioning the two nations as strategic allies in the
pursuit of common goals (Kiran and Madaan, 2022).
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| Methodology |
The
study is based on secondary data. Both published and unpublished sources of
data are used. The data is mainly collected through various online and offline
sources viz., Uncomtrade, World Bank, UN Publications, Economic survey of India
and through various Books, Periodicals and Journals. Data related to
composition of trade are based on Harmonized System (HS) coding at 6-digit
level. The present paper attempted to analyze bilateral trade between India and
Afghanistan for the period 2001-2022.
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| Analysis
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Trade At Bilateral
Level
Volume of Trade
Afghanistan’s
bilateral trade with India has been growing steadily and got a big boost in
recent years. Table 1 depicts the volume of bilateral trade between India and
Afghanistan during 2001-22 at current prices. India’s trade with Afghanistan
increased from US$ 40.8 mn in 2001 to US$ 896.4 mn in 2022. Her total bilateral
trade with Afghanistan accounted for US$ 14086.0 mn during 2001-22. India’s
exports to Afghanistan have been growing faster than her imports from latter.
India’s exports to Afghanistan have increased from US$ 20.9 mn in 2001 to US$ 481.6
mn in 2022. As regards to India’s imports from Afghanistan, these have
increased from US$ 19.9 mn during 2001 to US$ 414.8 mn during 2022. As regards
to India’s trade balance with Afghanistan, table 1 shows that India’s trade
balance with latter was favourable throughout the study period. The highest
trade surplus that India had with Afghanistan was US$ 396.4 mn during 2019. 
Source:
UN Comtrade Database (2023). https://comtradeplus.un.org/TradeFlow
Composition of Trade
An examination of inter-temporal changes in
trade composition in the development process may provide useful insights into
the evolving trade pattern of India and Afghanistan. With this purpose in view,
traded commodities of these countries have classified adopting 6-digit HS
classification. Table 2 presented the composition of India’s exports to
Afghanistan during 2001-22. Cane or beet sugar and chemically pure sucrose;
Medicaments consisting of mixed or unmixed products; Vaccines for human
medicine; Cumin seeds; Women's or girls' tracksuits and other garments; Woven
fabrics; Nuts and other seeds;
Wheat and meslin; Chewing tobacco, snuff and other manufactured tobacco, etc. are the major items
of India’s exports to Afghanistan during 2001-22. The exports of these major 30
commodities from India to Afghanistan were accounted for US$ 8.3 mn in 2001
which increased to US$ 194.7 mn in 2013 and US$ 371.0 mn in 2022. However, India's
total exports to Afghanistan were recorded at US$ 20.9 in 2001 which increased
to US$ 513.5 mn in 2013 before declining to US$ 481.6 mn in 2022. 
Source:
UN Comtrade Database (2023). https://comtradeplus.un.org/TradeFlow
India’s
imports from Afghanistan have shown modest diversification. Table 3 reveals the
composition of major items of India’s imports from Afghanistan during 2001-22.
The most important items of India’s imports from Afghanistan are Lac; natural gums, resins, gum-resins, balsams
and other natural oleoresins; Dried grapes; Fresh or dried figs; Fresh or dried
pistachios, shelled; Juniper berries and seeds of anise, badian; Fresh or dried
almonds, shelled; Dried apricots; Saffron; Plants, parts of plants, incl. seeds
and fruits, used primarily in perfumery, in pharmacy; Dried, shelled beans of
species; etc. India's imports of these
major 30 commodities from Afghanistan were accounted for US$ 7.5 mn in 2001
which increased to US$ 280.1 mn in 2016 and
US$ 412.3 mn in 2022. However, India's total imports from Afghanistan were
recorded at US$ 19.9 mn in 2001 which increased to US$ 494.8 mn in 2019 before
declining to US$ 414.8 mn in 2022. 
Source:
UN Comtrade Database (2023). https://comtradeplus.un.org/TradeFlow
Direction
of Trade
Table 4 shows the
direction of India’s exports during 2001-22. During 2022, the major export
partners of India were USA (17.7 per cent), UAE (6.9 per cent), Netherlands
(4.1 per cent), China (3.3 per cent), Bangladesh (3.1 per cent), Singapore (2.6
per cent), and UK (2.5 per cent). The per cent share of India's 15 major export
partners in her total exports was recorded at 55.3 per cent in 2001 which
increased to 62.3 per cent in 2005 before declining to 55.7 per cent in 2022.
The share of Afghanistan in India's total exports was accounted for 0.2 per
cent in 2003, 0.3 per cent in 2019, and 0.1 per cent in 2022. Compared to other
export partners, Afghanistan's share in India's total exports was very low. 
Source: UN Comtrade Database (2023). https://comtradeplus.un.org/TradeFlow
The direction of
India's global imports during 2001-2022 has been presented in table 5. During
2022, the major import partners of India were China (14.0 per cent), UAE (7.4
per cent), USA (7.1 per cent), Saudi Arabia (6.3 per cent), Russian Federation
(5.5 per cent), Iraq (5.3 per cent), Indonesia (3.9 per cent), and Singapore
(3.3 per cent). The per cent share of India's 15 major import partners in her
total imports was recorded at 34.9 per cent in 2001 which increased to 59.0 per
cent in 2015 and 67.8 per cent in 2022. The share of Afghanistan in India's total
imports was accounted for 0.1 per cent in 2015, 0.1 per cent in 2021, and 0.1
per cent in 2022. It may be noted that Afghanistan's share in India's total
imports was very low. 
Source: UN Comtrade Database (2023). https://comtradeplus.un.org/TradeFlow
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| Conclusion
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Foreign
trade has played a vital role in the development of India and Afghanistan
relations. Indo-Afghanistan bilateral trade has been growing during 2001-22.
Volume of bilateral trade between India and Afghanistan during 2001-22 has
increased significantly, from US$ 40.8 mn to US$ 896.4 mn. In recent years,
India had surplus in its balance of trade with Afghanistan due to high export
capacity to Afghanistan. Cane or beet
sugar and chemically pure sucrose; Medicaments consisting of mixed or unmixed
products; Vaccines for human medicine; Cumin seeds; Women's or girls'
tracksuits and other garments; Woven fabrics; Nuts and other seeds; Wheat and
meslin; Chewing tobacco, snuff and other manufactured tobacco, etc. are the
major items of India’s exports to Afghanistan during this period. Similarly, India’s major imports from Afghanistan are Lac;
natural gums, resins, gum-resins, balsams and other natural oleoresins; Dried
grapes; Fresh or dried figs; Fresh or dried pistachios, shelled; Juniper
berries and seeds of anise, badian; Fresh or dried almonds, shelled; Dried
apricots; Saffron; Plants, parts of plants, incl. seeds and fruits, used
primarily in perfumery, in pharmacy; Dried, shelled beans of species; etc
during 2001-22. As regards India's direction of exports and imports, USA, UAE,
Netherlands, China, Bangladesh, Singapore, and UK were the major export
partners of India during 2022. On the other hand, the major import partners of India
were China, UAE, USA, Saudi Arabia, Russian Federation, Iraq, Indonesia, and
Singapore in 2022. Comparatively, Afghanistan's share in India's total exports
and imports was quite low. However, it has been clear from the analysis that
Afghanistan's capacity to meet India’s import requirements has been very
limited, while India can easily meet Afghanistan's import requirements. The
decline in the share of Afghanistan in India's total exports and imports is a
matter of great concern and need immediate policy measures to improve this
trend. |
| References
|
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& Duan, P. (2021). International trade and economic growth in
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accessed on August 9, 2023. 2. Gupta, S.P.
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