India Charts Its IMEC Path To Global Trade Influence – Analysis

By Soumya Bhowmick

During the G20 Summit in late 2023, an agreement was signed between India, the United States, the United Arab Emirates, Saudi Arabia, France, Germany, Italy and the European Union to establish the India–Middle East Economic Corridor (IMEC). This initiative is a strategic response to China’s Belt and Road Initiative (BRI) and aims to position India as a pivotal player in global trade.

The IMEC seeks to create a comprehensive infrastructure network connecting countries with a combined GDP of US$47 trillion, encompassing shipping lanes, railways, undersea cables and solar grids. This initiative holds great potential to bolster global trade efficiency and ensure energy security. But the IMEC faces several geopolitical, infrastructural and environmental challenges that must be addressed to ensure its success.

While the IMEC holds great promise, its implementation is not guaranteed. The corridor is expected to run through geopolitically sensitive areas such as the Middle East, where conflicts, political instability and regional rivalries could pose significant risks. For instance, the war in Gaza has delayed the project’s progress. Infrastructure bottlenecks, such as the need for substantial upgrades to rail and port facilities in some participating countries, may also delay the expected efficiency gains.

The reliance on intermodal transportation — combining rail, sea and road transport — could also create logistical complexities. While the IMEC aims to reduce shipping times by up to 40 per cent, the 30 per cent cost reduction claim remains debatable, since the intermodality involved in the IMEC could increase costs due to additional handling, transhipment and coordination requirements. The project’s success will depend on whether the corridor can maintain its promised efficiency despite these hurdles.

The IMEC is not a direct alternative to China’s BRI, but it is part of the global response to counter China’s growing economic influence. Unlike the BRI, which has focused extensively on infrastructure financing in developing countries, the IMEC seeks to establish a network of high-efficiency trade routes by prioritising cutting-edge technology, green energy solutions and digital infrastructure.

Crucially, BRI investments also have varied trajectories. While the emergence of the COVID-19 pandemic caused a sharp decline in Chinese investment in BRI projects in 2020, data from 2023 suggests a rebound in sectors such as green energy and technology. But IMEC’s focus on sustainable energy solutions and connectivity could make it an appealing alternative for countries looking to avoid the debt traps associated with BRI projects.

The IMEC project has attracted attention for its ambitious green energy and infrastructure plans, but it must also deal with environmental and socio-political risks. Developing solar grids and hydrogen corridors is a significant step toward renewable energy, but the environmental footprint of constructing this massive infrastructure is a concern.

While the corridor aims to promote clean hydrogen trade, questions also remain about the feasibility of large-scale green hydrogen production and transportation across long distances. Ensuring this energy source is produced using renewable energy rather than fossil fuels will require continuous technological advancements and investments.

One of the IMEC’s significant contributions could be reducing the global economy’s reliance on critical maritime chokepoints like the Suez Canal. The corridor proposes an alternative route that could reduce congestion and improve trade resilience for India and its partners. But while the IMEC may offer an alternative route, it is unlikely to replace the Suez Canal entirely, given the volume of global trade passing through the latter. The IMEC may provide some relief, but the Suez Canal will remain vital in international trade due to its centrality and established infrastructure.

The IMEC also plans to establish a 20,000 kilometre cable system — the Trans Europe Asia System — to bolster global communication networks. Given that 95 per cent of the world’s communication flows through undersea cables, this project is vital for improving the security of international data transmission.

India’s involvement in the IMEC reflects its growing diplomatic prowess. The corridor offers India the opportunity to strengthen its geopolitical alliances with key countries in the Middle East, Europe and North America while simultaneously countering China’s influence in global trade. Similarly, by focusing on the IMEC’s economic and strategic benefits, India can consolidate its role as a significant player in global trade networks.

The corridor will also serve to promote India’s Digital Public Infrastructure, a framework designed to enhance financial inclusion and streamline digital transactions. By integrating Digital Public Infrastructure into the IMEC, India could set new standards in cross-border digital trade and communication.

The IMEC represents a significant opportunity for India to strengthen its position in global trade networks. It offers a comprehensive strategy to enhance regional cooperation and economic resilience by focusing on trade efficiency, renewable energy and digital connectivity. For the IMEC to succeed, participating countries must align on an actionable implementation plan that addresses these challenges head-on. Only by doing so can the IMEC realise its potential to drive global trade, secure energy transitions and offer a robust alternative to existing trade routes.

• About the author: Soumya Bhowmick is Associate Fellow at the Centre for New Economic Diplomacy at the Observer Research Foundation.
• Source: This article was published by East Asia Forum