The recent escalation of conflict between Palestinian armed group Hamas and Israel has cast a menacing shadow over India’s ambitious endeavors in global trade. The grand vision of the India-Middle East-Europe Economic Corridor (IMEEC) has been unveiled by a consortium of global leaders, led by Indian Prime Minister Narendra Modi. However, it now appears to be veering off course, its wings clipped by the turmoil in the Middle East.
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Monday, September 9, 2023, bore witness to these ominous apprehensions materializing with swift, tangible impact. Oil prices surged, the allure of gold returned to investors, and the once-booming Dalal Street echoed with a deafening tumble. Anxiety permeated the air as market players grappled with the uncertainty of what lay ahead.
Turmoil hits railway and shipping stocks
In the wake of the attack and counter attack, railway stocks, including IRCON, Jupiter Wagons, RVNL, and IRFC, suffered significant losses, each plummeting by a daunting 5-6 percent. The very foundation of India’s plans to construct the IMEEC corridor appeared shaken.
Meanwhile, Adani Ports, the owner of Haifa Port in Israel, saw its shares plummet by 5 percent on Monday, sinking to a day’s low of Rs 794.15 on BSE. The company had previously clarified that Haifa’s contribution to APSEZ’s numbers amounted to a mere 3 percent of the total cargo volume, yet the market reacted with unwavering trepidation.
Shipping stocks didn’t escape the storm either, with Shipping Corporation witnessing a sharp decline of approximately 5 percent on Monday. The dreams of Middle East normalization, which had seemed tantalizingly close, now appear to have been postponed.
IMEEC vs. Belt and Road initiative
The announcement made during the New Delhi summit carried great promise, as it would connect Saudi Arabia with Western access and develop a rail network to connect to Israel’s Haifa port via Jordan. The grand plan aimed to establish critical trade routes between Middle Eastern nations and India, fostering connectivity via shipping lanes from regional ports, ultimately enhancing trade speed by 40 percent, as emphasized by European Commission President Ursula von der Leyen during the September summit.
It’s important to note that India has vehemently denied assertions that the IMEEC was conceived as an alternative to China’s Belt and Road Initiative. Even as the US and the EU sought to counterbalance China’s growing influence, India’s aspirations for a grand trade corridor now stand at a crossroads, where uncertainty looms large, and the echoes of conflict resonate far and wide.
IMEEC as the ‘Plug-and-Play’ game changer for India
In today’s interconnected world, any political conflict or war possesses the potential to disrupt the delicate balance of global economies. For India, the India-Middle East-Europe Economic Corridor (IMEEC) held immense promise, with G20 Sherpa Amitabh Kant describing it as a “plug-and-play project” capable of unlocking substantial trade opportunities hampered by connectivity issues.
The IMEEC’s potential was vast, poised to reduce trade times between the EU and India by a remarkable 40%, thus slashing energy costs and bolstering trade. Moreover, it would have acted as a green and digital bridge, linking key commercial hubs, facilitating clean energy production and exports, and expanding power grids and telecommunication networks.
The economic advantage for India was equally significant. The corridor could have substantially decreased the overall cost of shipping goods to Europe, offering a competitive edge on the international trade front, as emphasized by Vinod Kaul, Executive Director of the All India Rice Exporters Association.
In this delicate juncture of international relations, ongoing conflicts and global trade ambitions, India’s future and the fate of the IMEEC hang in the balance. The decisions and actions of key players in the Middle East and beyond will determine the path to peace and prosperity or further escalation of the fatalities, uncertain future.
