India-Middle East-Europe Economic Corridor (IMEC)

General Studies Paper-2

Context: The Union Minister of Commerce and Industry emphasized the potential of India-Middle East-Europe Economic Corridor (IMEC) as a modern-day Silk Route aimed at connecting Asia with Europe through the Middle East.

About India-Middle East-Europe Economic Corridor (IMEC)

• Establishment: The MoU signed by leaders from India, the European Union, France, Germany, Italy, Saudi Arabia, UAE, and the US at the G20 Summit (2023) in New Delhi directly points to the official announcement and initial steps for the IMEC.
• Aim: The description of a multi-modal connectivity project involving ports, railways, roads, sea lines, and pipelines to enhance trade between India, the Arabian Peninsula, the Mediterranean region, and Europe perfectly aligns with the stated goals of the IMEC.
• Corridors: The division into an Eastern corridor (India to the Gulf) and a Northern corridor (the Gulf to Europe) is a key structural element of the IMEC.

Significance IMEC for India

• Strategic Geopolitical Influence:
  • Counter to China’s BRI: IMEC is viewed as a Western-backed alternative to China’s Belt and Road Initiative (BRI), giving India a key role in shaping global connectivity.
  • Strengthens ties with West Asia and Europe: It enhances India’s diplomatic and trade engagement with countries like UAE, Saudi Arabia, Israel, and EU nations.
• Trade and Economic Boost:
  • Faster, cheaper trade routes: IMEC offers an efficient corridor for Indian exports to reach European markets through the Middle East, reducing transit time and cost.
  • Economic integration: Encourages foreign investment in India’s ports, railways, and logistics sectors, boosting employment and GDP.
• Energy Security:
  • Facilitates better energy cooperation, especially in green hydrogen, natural gas, and renewable energy, aligning with India’s transition to clean energy.
  • Enhances connectivity to Gulf energy hubs like Saudi Arabia and UAE.
• Digital Infrastructure and Technology:
  • Includes plans for digital connectivity (like fiber-optic cables) between India, Middle East, and Europe—critical for tech partnerships and cyber cooperation.
• Infrastructure and Maritime Development:
  • Boosts India’s port-led development under the Sagarmala Project by integrating Indian ports into global logistics chains. Logistics cost can be reduced up to 30%.
• Multilateral Cooperation:
  • Reinforces India’s image as a responsible global player and a vital link between Global South and Global North.
  • Encourages triangular cooperation with the US, EU, and Gulf nations.

Challenges

• Geopolitical Instability:
  • Ongoing conflicts like the Israel-Palestine crisis, the friction between Iran and Gulf nations, and general regional unrest can impact corridor planning and operations.
  • Issues like piracy, naval skirmishes, or blockades in these crucial chokepoints can seriously jeopardize smooth trade flow.
• Infrastructure and Funding Hurdles:
  • Setting up multimodal logistics points like ports, railways, energy systems, and digital networks requires a hefty investment from both public and private sectors.
  • Challenges such as land acquisition, getting regulatory approvals, and navigating bureaucratic red tape across various countries can slow down infrastructure development.
• Multinational Coordination:
  • IMEC brings together several sovereign nations (India, UAE, Saudi Arabia, Jordan, Israel, and EU countries), each with its own set of priorities, policies, and political landscapes.
• Technological and Digital Standardization:
  • The corridor features digital and energy elements, including data cables and green energy grids and ensures that everything works seamlessly while checking other technological challenges.
• Competition from Existing Routes:
  • Current maritime routes through the Suez Canal or even China’s BRI corridors might still be more affordable. India needs to make sure that IMEC is not only cost-effective but also logistically superior to draw in global businesses.

Key Outcomes of the Meeting

• PM Modi was conferred ‘Mithra Vibhushana’ the country’s highest civilian honour medal by the Government of Sri Lanka.
• Energy Cooperation: Both the nations inked an agreement to develop Trincomalee as an energy hub and jointly inaugurated the Sampur solar power project, aimed at boosting Sri Lanka’s clean energy capacity.
  • A grid interconnectivity deal was also signed, opening the door for Sri Lanka to potentially export electricity to India in the future.
• Railway Connectivity: An upgraded northern railway line between Maho and Omanthai, enhancing connectivity between the North Central and Northern Provinces was jointly inaugurated, along with an upgraded railway signalling system at Anuradhapura railway station.
• Comprehensive MoU on defence cooperation: The umbrella agreement consolidates various existing defence-related understandings into a coherent framework, enabling structured dialogue.

India and Sri Lanka Relations

• Trade Relations: India-Sri Lanka Free Trade Agreement (ISFTA) in 2000 contributed significantly towards the expansion of trade between the two countries.
  • India has traditionally been among Sri Lanka’s largest trade partners and Sri Lanka remains among the largest trade partners of India in the SAARC.
  • India is also one of the largest contributors to Foreign Direct Investment in Sri Lanka.
• Cultural relations: The Cultural Cooperation Agreement signed in 1977 forms the basis for periodic Cultural Exchange Programmes between the two countries.
  • The Buddhist and Tamil links enhance people-to-people connect and soft power.
• Tourism: India has traditionally been Sri Lanka’s top inbound tourism market, followed by China.
  • As per latest data from the Sri Lanka Tourism Development Authority, India is the largest source for tourists in 2023.
• Maritime Security and Defence Cooperation: In 2011, a decision was taken to establish the Colombo Security Conclave which aims to further promote maritime security in the Indian Ocean Region.
  • India and Sri Lanka conduct a joint Military exercise named ‘Mitra Shakti’, Trilateral Maritime Exercise “Dosti”, and a Naval exercise named SLINEX.
• Multilateral Forum Collaboration: India and Sri Lanka are member nations of the South Asian Association for Regional Cooperation (SAARC), South Asia Co-operative Environment Programme, South Asian Economic Union and BIMSTEC, working to enhance cultural and commercial ties.

Areas of Concern

• The Fishermen Issue: Sri Lanka’s proximity to Indian territorial waters has often blurred the line for fishermen on both sides in pursuit of fish stock.
• Rise of China: China’s increasing strategic investments in vital maritime ports in the IOR has been an area of concern.
  • Strategic infrastructure projects like Hambantota Port, leased to China for 99 years.
• Trade and Economic Imbalances: CEPA (Comprehensive Economic Partnership Agreement) talks stalled.
• Slow Progress in Development Projects: Indian-funded projects like Jaffna Cultural Centre, Trincomalee Oil Tank Farm, and housing schemes face bureaucratic delays.
• Internal Instability in Sri Lanka: 2022 economic crisis led to massive unrest which caused a spillover effect on the Tamil Nadu coast and refugee inflow.

Way Ahead

• India–Sri Lanka relations, rooted in geography and history, must now evolve through shared economic prosperity, strategic cooperation, and people-centric development.
• The strengthened ties between both the nations will ensure mutual growth and regional stability in line with India’s Neighbourhood First and SAGAR visions.