Trade, import and export for MSMEs: The Islamic fundamentalist Taliban returned to power in Afghanistan in August, leading an insurgency against the US-backed administration in Kabul and toppling it after 20 years. Political uncertainty in the war-torn country, which has clouded the already bleak path of economic recovery, has also taken a heavy toll on Indian traders and small businesses that have traded with Afghanistan for years. According to Indian government statistics, bilateral trade between the two countries crossed $ 1.5 billion in fiscal year 2019-2020, with exports to Afghanistan reaching nearly $ 1 billion and imports from from Afghanistan to about $ 530 million. In fact, India’s exports increased by more than 89 percent between fiscal 2016 and fiscal 20, while imports increased by 72 percent during the same period. So what has essentially been the impact on MSME traders since the Taliban took control of Afghanistan?
The main Afghan exports to India are dried fruits and spices. According to Trading Economics, nuts, melons, resins, spices, coffee, tea, etc. had the highest export value in 2019, while the top imports from India were equipment. electronics, sugar and confectionery, iron and steel articles, pharmaceuticals, etc. Local traders Financial Express Online spoke to said the situation on the ground was in stark contrast to what was feared in August.
“The fear among traders was based purely on speculation. In fact, the Taliban never stopped exporting or importing with India even for a single day. There has been no trade stoppage so far. There is also no impact on the offer or on payments. 80% of the Afghan economy depends on dried fruits and if they stop it, how will they evolve, ”Anil Mehra, a leading local spice and dried fruit trader in Amritsar told Financial Express Online. Amritsar is one of the top import destinations for dried fruit to India from Afghanistan except Delhi, Mumbai etc.
Mehra, who runs Kabul Trading Co. and is also the chairman of the Karyana Federation and the Dried Fruit Association in Amritsar, claimed that the dried fruits exported by traders to Afghanistan in recent weeks were more than they exported it before the Taliban regime took control. “80 to 90% of their dried fruit harvest comes from India. They are sending more since their storage facilities are impacted. Therefore, the rates, in fact, have been reduced. So the supply has been constant and we have already received goods that were due to arrive during the upcoming holiday season, ”Mehra said.
Likewise, for Kanwarjit Bajaj, which owns the Khari Baoli-based brand of nuts and dried fruits KBB Nuts, Asia’s largest spice market, the visible impact on supply, prices and payments n hasn’t been there so far. While Bajaj and local small businesses expected an impact at the start of the crisis in Afghanistan last month, they were pleasantly surprised.
“The goods arrive, there is no effect on prices as payments are made via third parties in Dubai amidst disruption of banking services. The impact was initially expected due to the non-functioning of the government. However, they don’t have the money to pay their employees. Although the business has grown over the past two years, we don’t know how it would turn out, “Bajaj said. The federation has around 250 traders.
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It is important to note that there has also been no notification from the Indian government regarding restrictions on trade with Afghanistan. India’s export body, Federation of Indian Export Organizations (FIEO), noted that while the Taliban initially halted exports and imports for a few days, but then resumed and any impact on The pricing was more due to the perceived threat to the shortage of goods rather than to actual impact.
“Imports from Afghanistan arrive through land borders. There has been no official notification on the trade ban with Afghanistan. The problem started because Pakistan had closed the border with Afghanistan, which was then reopened. The challenge is that Afghanistan does not have the money to pay for India’s exports. Since we have a duty-free agreement with Afghanistan, there might be a slight increase in commodity prices if Afghan exports are affected in the future, ”said Ajay Sahai, Managing Director and CEO of the FIEO at Financial Express Online.
According to a trade memo on India-Afghanistan trade relations by the Indian government, Pakistan has denied smooth and reliable land connectivity between India and Afghanistan over the years. However, to overcome this challenge, an air cargo corridor was created in June 2017 connecting India and Afghanistan. More than 500 flights have been operated on the corridor up to FY20, carrying nearly 7,000 tonnes of cargo worth more than $ 200 million. In FY20, India’s exports to Afghanistan increased by 39.43 percent while imports from Afghanistan increased by 21.68 percent, the brief noted citing reports. data from Indian Ministry of Commerce.
Contrary to the opinion of traders, India’s largest trade organization, the Confederation of All Indian Traders (CAIT), said payments for exporters were stalled due to the trade blockade which led to the financial crisis. The organization has now urged the government to adopt a temporary policy allowing these traders to support them with financing and an alternative supply of products imported from Afghanistan.
“The government should create a separate policy for a while in which those importing and exporting to Afghanistan can have easy funding and also suggest what the alternative supply channels might be. Traders have asked the government to allow them to unload their shipments to Afghanistan for fear of loss or late payment. So unless the government finds a solution to this, I’m not sure the traders wouldn’t be able to fix it. The government can guide us on how to boost local sourcing, ”Praveen Khandelwal, CAIT general secretary, told Financial Express Online.