Economic Consequences of Taliban's Rule

According to Indian government statistics, the bilateral trade between India and Afghanistan had reached USD 1.5 Billion, with India having surplus of trade. Apart from trade, India had made various strategic investments in Afghanistan. India has invested approximately USD 3 Billion in almost 400 construction projects ranging from construction of dams to highways in Afghanistan, including construction of the Afghan Parliament building which cost 90 million USD. More significantly, the upgrades of the Port of Chabahar in Iran and the construction of the India, Iran, Afghanistan corridor which served as a key pivot in India’s foreign policy, are now in jeopardy with the change in power in Kabul.


With the ascension of the Taliban, concerns over the returns on these investments loom. Not only has almost all bilateral trade with the sanction-ridden Taliban been compromised, but all opportunities of accessing the Central Asian nations through this initiative have been lost as well. The few avenues for servicing India’s surplus yet uncompetitive agricultural production have now been blocked, and in the long-term, India has lost a key ally for asserting regional influence.


Apart from the direct implications, the Taliban has been getting support from Pakistan and China. While Pakistan has supported the Taliban financially in the past, it is currently facing an economic crisis, implying that it can no longer support the Taliban financially. This leaves China as the sole major international ally of Afghanistan. In exchange for control over Afghan’s natural resources, China can now provide economic aid to the now authoritarian state. Direct control of the highly lucrative rare earth metal deposits, the demand for which will only exponentially grow, places China in a position to potentially outcompete other nations. Indo-China relations are already unstable and on top of that China achieving global power status can only mean one thing for the Indian economy: negative implications on India’s international trade.


Having heavily invested in Afghanistan and building a positive trade relationship in the past two decades, India now finds itself in a lost path with the Taliban ruled Afghanistan which has close relations with both Pakistan and China. How to move ahead with an authoritarian state which undermines almost every aspect of democracy is an important question the Ministry of External Affairs of India now faces.

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