By the Blouin News Politics staff

Can India carve an economic niche in Central Asia?

by in Asia-Pacific.

uring the launch of Digital India Week at IGI Stadium on July 1, 2015 in New Delhi, India. Hindustan Times/Hindustan Times via Getty Images

Indian Prime Minister Narendra Modi on July 1, 2015 in New Delhi, India. Hindustan Times/Hindustan Times via Getty Images

Indian Prime Minister Narendra Modi began a large tour of Central Asia and Russia on Monday in Uzbekistan in a historically rare visit. Underlying Modi’s trip is India’s larger geostrategic aim– to regain lost ground in its competition with China for influence in the region, and notably access its still largely-untapped economic potential.

Chandrajit Banerjee, Director General of the Confederation of Indian Industry (CII), was enthusiastic about Modi’s visit to Central Asia, stating that trade with “Kazakhstan, Turkmenistan, Tajikistan, Uzbekistan, and Kyrgyzstan can multiply manifold from the small base of $1.4 billion currently.” According to CII, the major areas of opportunity for India in Central Asia include oil and gas, minerals and metals, agricultural products, pharmaceuticals, textiles and chemicals.

India is concentrating on transnational energy- and connectivity-related projects. The long-planned but perpetually-delayed TAPI (Turkmenistan-Afghanistan-Pakistan-India) natural gas pipeline will receive renewed focus, although the risks of militant attacks and corruption in Afghanistan and Pakistan have not diminished. Meanwhile, Tajikistan wants more Indian companies to invest in its transmission lines to supply electricity from its hydropower projects across Central Asia and Pakistan. And Kazakhstan, with its oil and uranium deposits, is already India’s largest trading partner in the region, and is the site of much competition for influence between China and Russia — and now to a lesser extent India.

Trade in services between India and Central Asia has tremendous room for expansion, including in sectors such as IT, education, and other skill development. Referring to agricultural technology, Tajikistan’s ambassador to India Mirzosharif Jalolov said “India’s green revolution shows that there is a lot of experience in this sector, and we want cooperation in this.” (The CII advocates that India and the Eurasian Economic Union engage in fast-track FTA negotiations to further improve economic ties.)

Competition with China is ramping up in light of Beijing’s massive infrastructure ambitions, notably the Silk Road Economic Belt. China’s trade with Central Asia has skyrocketed from $1 billion in 2000 to $50 billion in 2013, and is on track to keep growing. On a per-country basis, China’s commitments are staggering, such as its pledge last September to invest at least $6 billion in Tajikistan (equal to 70% of the country’s GDP) over three years.

Over the next year or so, trade between India and Central Asia is likely to rise, although it will remain far below the level of China- Central Asia trade. In May India signed an agreement with Iran to develop the Chabahar port in the southeast of the country. It would be the southern endpoint of a “North-South corridor” allowing India to access Afghanistan and Central Asia, without having to rely on its longtime adversary Pakistan. (Tellingly, Chabahar is not far from the Pakistani port of Gwadar, which China is developing as the sea terminus of its economic corridor stretching across Pakistan.) If built, and especially if Western sanctions on Iran are relaxed, then Chabahar could give a real boost to India- Central Asia trade.

India does not have the bankroll to finance international development projects on the scale that China does. However, it cooperates within the BRICS and soon within the Shanghai Cooperation Organization (both of which include China and Russia), and it is content to carve out a small but influential niche in Central Asia.