Nickeled & Dimed

Penny for your thoughts?

We are accepting articles on our new email:

, ,

India-Afghanistan: A Tie from the Past

Indo-Afghan border mark during World War II
Indo-Afghan border mark during World War II

In this essay, Srilaxmi Sriram explores India’s historical relationship with Afghanistan and underlines the future potential as well as possible obstacles which can serve as deterrents in smooth economic and political relations.

Afghanistan, as a rich land with abundant resources, has been a crucial area since the Mughal rule in India. Since that period, Afghanistan hence became indispensable for India’s trade and economics. Afghanistan and India have maintained political, economic and cultural ties for a long time now. Apart from being a contributor to Afghanistan’s political and economic development, India has also maintained a good friendship with this country in various capacities. The location of Afghanistan is such that it serves as an important ally for India. It is centrally situated with connections to Central Asia and Middle East from South Asia. Countries such as Turkmenistan and Kazakhstan are gateways to enrich Indian relations making Afghanistan a salient partner. With India backing it up, Afghanistan has become an internationally contributing member.

The Islamic militia, Taliban, controlled the whole of Afghanistan until they were ousted in 2001. The reason for their formation was to end the political mayhem after the withdrawal of Soviet Union and to austerely implement Islamic rules. The Taliban government was some what endorsed by the US government until the rise of Osama Bin Laden. After the 9/11 the Taliban had intentions to extradite Osama but the US launched the War on Terror operation. The Taliban had around 48,000 militants and weapons from the 1980s battle. Neither was India in support of Taliban government, nor was it part of the Western nations. The then government of Afghanistan suffered from a major blow in their economy during the period of War on Terror, after which they required large volumes of help to recover from this.

When the Taliban was taken down in 2001, thousands were killed and billions of dollars spent trying to bring back peace and security to the nation. India became part of the anti-Taliban alliance when they had to release three Islamist militants as an exchange for the safe arrival of Indian Airlines Flight 814 back to India. India was always against the workings of the Taliban government and hence there was a wave of satisfaction after their fall. India’s intention was the same as the other nations when it came to establishing a stable government in Afghanistan. India felt that Afghanistan must have a stable government without any foreign influence or any terror organizations in power. This is mainly because Afghanistan’s stability is very important for India’s security in the international realm.

The Economic Relationship

Afghanistan saw its first democratic transition of power in September 2001 when Ashraf Ghani was sworn in as the President while India has had a democratic government since 1947. Afghanistan has a population of 31.3 million people out of which 9 million live below the poverty line. The country’s largest export income is from opium, producing 90% of the world’s total opium. It exports fruits and nuts, hand-woven carpets and wool as well. It majorly imports food, textiles, machinery and petroleum products. The rich mineral resources have not been exploited much because of the political conditions in Afghanistan. India on the other hand is the world’s second most populous country with a growth rate of approximately 7% per annum. Though 17% of India’s income is from agriculture, the service and industrial sector has also seen a brighter side in last few years. The total bilateral trade between Kabul and New Delhi accounted for about $ 639 million, i.e., 0.08 per cent of the total trade in 2012. As more than 20 per cent of Afghanistan’s export happens to India, it is primarily important to maintain the relation.


After providing the Strategic Partnership Alliance (SPA), India decided to provide assistance to Afghanistan in the field of education, infrastructure, and technical help to rebuild the affected areas after the oust of Taliban government. India was the first country with which Afghanistan signed the SPA, in spite of the US and Pakistan opening their offers. India provided Afghanistan with around $2 Billion in various development assistance programs. This made India one of the largest donors among all regional countries.

Though India has had a very rough relationship with Pakistan, the trade with Afghanistan could be more viable if the Pakistani links were used. Robert D. Kaplan says, “Afghanistan has been a prize that Pakistan and India have fought over directly and indirectly for decades”. India’s growing influence on Afghanistan is seen as a threat by Pakistan. The use of the Iranian Port of Chabahar by India, Iran and Afghanistan was part of an agreement signed in 2012. This was to transit goods without the interference of Pakistan, in spite of this option turning out to be more expensive. There is also an increased amount of competition in the consumer market of Afghanistan by Pakistan and India. In 2010, India was excluded from the Afghan-Pakistan Trade and Transit Agreement (AAPTA) due to which a potential boost in the Afghan economy was diverted. According to the agreement of TAPI (Turkmenistan, Afghanistan, Pakistan & India) , Turkmenistan will supply 90 million metric standard cubic metres per day (mmscmd) of natural gas. The hostile Indo-Pak relations will hinder the reach of this 21st century fuel to our country.

In January 2009, the construction of Zaranj-Delaram highway near the Iranian border was initiated by India for which the expense was around $150 million. This road was extremely important as it allowed India to export goods into Afghanistan via the Iranian ports without much dependence on the Pakistani soil. It has also helped in the building of the new set for the Parliament ($75 million) and establishing the Selma Reservoir power project in the province of Hairat for which the cost would be roughly around $170 million and Construction of a power line from Pul-i-Khumri to Kabul ($120 million. Bilateral trade between these two countries have always been on the rise and for the fiscal year 2007-08 the estimated trade was about $358 million according to the Council on Foreign Relations. Over four thousand labourers and security personnel from India were given employment in various developmental activities in 2008. A syndicate of seven companies that are part of the Steel Authority of India Limited (SAIL) secured a $10.3 billion deal to mine in three iron ores in the central part of the country. Some Indian companies have also started bidding on copper and gold ventures.

Rich natural resources and minerals have been the greater source of attraction for other countries. The US estimated that an amount of $3 trillion worth of minerals resources still remains untapped. The Geological survey estimates 36.5 million cubic feet of natural gas is present in the northern Afghanistan. India has also favored Afghanistan to revive its manufacturing industries such as oil, cement, gas, and in services i.e. hotels, banking, and communications sector. In spite of the worldwide governance indicator ranking Afghanistan very low on its list, the Afghan Investment Law (2005) and the Constitution of Afghanistan (2004) have been successful in working to safeguard all its investors. Features like 100 per cent ownership and repatriation of revenue and capital are its attractions.

India believes that long-term investment plans must be initiated in Afghanistan for sustainable development and hence it is in the forefront in encouraging investment into Afghanistan. In fact Indian companies have shown interest in the mining sector especially in Hajigak ore reserves. In the efforts to attract investment to Afghanistan, Indian Government in association with the Confederation of Indian Industries (CII) hosted the Delhi Investment Summit in June 2012. About fifteen international organisations and fourteen countries participated in this conference. This attracted a lot of trans-national investment, created various job opportunities to its population and produced viable alternatives to technology. Around 100 companies from India have already invested in infrastructure sectors and natural resources, and the ‘virgin market’ has captivated the investors. At the ‘Heart of Asia’ conference in 2012 that took place in Kabul, India decided to give full support to Afghanistan for its nation-building activities. Although India believes that there are serious security concerns in these days, there has been no dearth of investment from India’s side. The summit came at the time when Afghanistan needed paramount assistance in security and development.

Prime Minister Modi and President Ghani have had various talks to strengthen the bilateral ties. But India is competing against China and Pakistan to harness their resources. Modi has shown great enthusiasm in improving international relation and rebuilding Afghanistan, keeping in mind all the shortcomings that has to be faced, as Afghanistan is very important for us. India’s steps have been very cautious, as the stability of Afghanistan still remains unprecedented. However, Kabul will remain at the top of our list not only for its natural resources but also for security and peace. President Ghani has been very welcoming for all the investors from India making it favourable for Indian businesses to thrive.


India’s relationship with Afghanistan is in all spheres and hence it is important that both these countries work for easing out any anomalies. As Indian and Afghanis share a similar cultural background with the Anglo-Afghan war and the Mughal period, it would be a cinch in cooperating with each other. Indian movies and music is appreciated by the Afghanis and Indians in turn love the Afghani food. There is very high potential for Indian business to grow in the emerging Afghan markets. Indian firms have engaged in social and economical spheres and induced development. As part of the Indian Council for Cultural Relations, numerous students have got an opportunity to study in India and get a wider exposure. The Afghan Embassy in Delhi will be signing around 20 Memorandum of Understanding (MoU) with state chambers and number of hospital across India later this month. There is no doubt that Indian investment will gradually bring down the existing inter-state tensions and hostility to invest in Afghanistan.

Srilaxmi Sriram is a student at Jindal School of International Affairs, JGU


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: