Domestic Economy

The Opportunity for India

The Opportunity for IndiaThe Opportunity for India

For many years Iran and India had similar travails with regard to their nuclear program. Both have been under sanctions for their program. Some scholars have drawn similarities between the two countries pointing out that both were under sanctions imposed by the West.

The July 14 deal between Iran and P5+1 would restore relations between New Delhi and Tehran to the level where there is no outside pressure on India. For many years, India baiters in Washington took India’s relations with Iran as a litmus test of India-US relations. With the deal done, India-Iran relations can now develop organically, read an article published in E-International Relations.

Importantly for India, which imports over 70% of its oil, oil prices will come down significantly with the influx of Iranian oil into the world market. This would have positive spin-offs for the Indian economy like a decrease in inflation, construction costs and so on. Given the current Indian government’s focus on the country’s development, this would fit in neatly with its plans to promote growth and provide jobs to Indian youth by reviving the manufacturing sector through the “Make in India” campaign.

The end of sanctions could also mean that India can go ahead with the International North-South Transport Corridor and the Chabahar project, which could become India’s entrée to Afghanistan circumventing Pakistan and where it has already committed to invest $85 million.

In May this year, a memorandum of understanding was signed by Indian Shipping and Transport Minister Nitin Gadkari and his Iranian counterpart, Abbas Ahmad Akhoundi under which Indian firms will build and operate cargo facilities at Chabahar Port – a free trade zone site on the Gulf of Oman.

On Thursday, head of the Port and Maritime Organization of Sistan-Baluchistan Province, Siavash Rezvani announced that Indian contractors are planning to commence the operations for completion of Phase-I of Chabahar Port Development Plan within the next two months, in cooperation with an Iranian private company.

Moreover, India and Iran can cooperate more in Afghanistan now, building on their previous history of cooperating against the Taliban through the Northern Alliance. There is also shared concern about terrorist groups and ISIS affiliates in the region. Neither India nor Iran wants an Afghanistan that is a client state of Pakistan or an unstable Afghanistan which could be a sanctuary for terrorist organizations.

Iran could emerge as the top oil and gas supplier to India. Moreover, Indian companies could help build oil and gas infrastructure in Iran. India has the largest petrochemical complex in the world in Jamnagar even though it does not have large reserves of hydrocarbons. Iran’s sweet crude oil, with its low sulphur content, is much easier to refine than oil from other countries. Modernization of Iran’s energy infrastructure would not only open up more business opportunities for Indians, but perhaps also jobs. India needs to provide jobs to the million Indian youths who enter the job market every year, and there are already about 7 million Indian workers in the Middle East. Moreover, Iran could turn out to be a market for refined petroleum products from India. India could also get involved in the development of more oil and gas fields in Iran. Importantly, with Iran joining the comity of nations, oil passing to India through the Strait of Hormuz is expected to be safer now.

There is tremendous scope for Indian pharmaceuticals in Iran since it has an acute shortage of medicines on account of the sanctions regime. Indian medicines, which are considerably cheaper than western medicines, could find a ready market in Iran. They could also start manufacturing units in Iran in the longer term. India has recently emerged as an important destination for medical tourism, because of its affordable healthcare, skilled doctors, cheap travel and bourgeoning pharmaceutical industry. It is estimated that India will have about 5 million medical tourists by 2016. There is an opportunity here for Iranians as well. For this, of course, India will have to ease visa restrictions on Iranians.