INDIA-MIDDLE EAST-EUROPE ECONOMIC CORRIDOR (IMEC)
1. Context
As the Red Sea crisis extends into its fourth month, global supply chains are increasingly contending with inflated freight costs, delayed vessel schedules, and product shortages. This situation has once again underscored the vulnerabilities of global supply chains, emphasizing the necessity of reconsidering alternative routes for global trade.
2. The Importance of Red Sea Route
The Red Sea route holds immense significance for global trade due to the strategic location of the Bab el-Mandab Strait. This narrow passage, nestled between Yemen and Djibouti, acts as a critical chokepoint, handling a staggering 12% of the world's international merchandise trade. It serves as a vital conduit for cargo ships and, crucially, almost half of all global oil shipments.
However, the ongoing Red Sea crisis has thrown a wrench into this well-oiled system. With the region in turmoil, major carriers have been forced to take a detour around Africa via the Cape of Good Hope. This significant rerouting has had several ripple effects:
- Soaring ocean freight: The added distance translates to increased fuel consumption and operational costs for shipping companies, which are inevitably passed on to consumers in the form of higher freight charges.
- Inflated insurance costs: The heightened security concerns due to the conflict have also led to increased insurance premiums for traversing the alternate route.
- Longer voyage times: The detour translates to longer journeys for vessels, leading to delayed deliveries and potential product shortages.
- Escalating transportation costs: All these factors culminate in increased transportation costs for goods, ultimately impacting businesses and consumers globally.
The Red Sea crisis acts as a stark reminder of the vulnerability of global supply chains and the critical role the Red Sea route plays in facilitating international trade. The disruption highlights the need for diversification and risk mitigation strategies to ensure the smooth flow of goods and prevent similar future disruptions from creating widespread economic repercussions.
3. Impact on India's trade
- The Red Sea crisis has significantly impacted India's trade, particularly with European and North African countries. These regions account for a substantial portion of India's trade volume, with nearly 24% of exports and 14% of imports flowing through the disrupted Red Sea route.
- In the past year (2022-23), India's bilateral trade with these regions amounted to a staggering $189 billion and $15 billion respectively. The ongoing crisis has instilled fear and uncertainty among Indian traders, leading to a 25% reduction in cargo shipments transitioning through the Red Sea, according to the Federation of Indian Export Organisations (FIEO).
- As these disruptions continue to cause delays and cost increases in global supply chains, China is seizing the opportunity to promote an alternative route: China-Europe freight trains as part of their Belt and Road Initiative (BRI). This strategic move by China presents a potential challenge for India, potentially impacting its trade competitiveness in the future.
4. About the IMEC
The India-Middle East-Europe Economic Corridor (IMEC) is a proposed trade route aimed at enhancing economic connectivity between India, the Middle East, and Europe. Announced during the G-20 summit in 2023, the IMEC seeks to establish a seamless transportation network to facilitate the flow of goods, services, and investments across the regions involved. The corridor is envisioned as a strategic initiative to bolster trade relations, spur economic growth, and promote regional integration.
Objectives of IMEC
- IMEC aims to boost bilateral and multilateral trade among the participating countries by streamlining trade routes and reducing transportation costs.
- The corridor intends to promote infrastructure development, including the construction of ports, railways, roads, and logistics facilities, to support efficient trade operations.
- IMEC seeks to foster greater economic integration and cooperation among India, the Middle East, and Europe, thereby creating a more interconnected and interdependent economic landscape.
- By providing an alternative trade route, IMEC aims to reduce dependence on existing maritime routes and mitigate the risks associated with geopolitical tensions and disruptions in traditional trade pathways.
Key Components of IMEC
- The backbone of IMEC is a comprehensive transportation network comprising sea routes, land routes, railways, and highways connecting key economic centers across India, the Middle East, and Europe.
- IMEC emphasizes the development of efficient logistics and connectivity infrastructure, including ports, airports, customs clearance facilities, and multimodal transport hubs, to facilitate seamless movement of goods and services.
- Effective policy coordination and regulatory harmonization among participating countries are crucial for the smooth functioning of IMEC. This involves aligning trade policies, customs procedures, and regulatory frameworks to minimize trade barriers and bureaucratic hurdles.
- IMEC requires substantial investments in infrastructure development, technology upgrades, and capacity-building initiatives. Leveraging public-private partnerships (PPPs), international financial institutions, and sovereign wealth funds can provide the necessary financing for IMEC projects.
Challenges and Considerations
- The geopolitical landscape of the Middle East, including conflicts and tensions in the region, poses significant challenges to the implementation of IMEC. Political stability and security are critical factors for the success of the corridor.
- Developing the requisite infrastructure, particularly in landlocked regions and conflict-affected areas, may encounter logistical and financial challenges. Coordinating large-scale infrastructure projects across multiple jurisdictions requires careful planning and coordination.
- Harmonizing trade regulations, customs procedures, and legal frameworks among diverse countries with varying legal systems and administrative practices can be complex and time-consuming.
- The environmental sustainability of IMEC infrastructure projects, such as port development and transportation networks, must be carefully assessed to minimize adverse ecological impacts and promote sustainable development.
5. The Way Forward
The IMEC holds immense potential to transform regional trade dynamics, foster economic growth, and enhance connectivity across India, the Middle East, and Europe. Continued political commitment, institutional cooperation, and investment mobilization are essential for realizing the vision of a vibrant and integrated economic corridor spanning three continents.
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For Prelims: India-Middle East-Europe Economic Corridor, Belt and Road Initiative, Red Sea, Cape of Good Hope
For Mains:
1. Discuss the significance of the Red Sea route for global trade, and analyze how the ongoing Red Sea crisis is impacting international supply chains. (250 Words)
2. Discuss the role of public-private partnerships (PPPs), international financial institutions, and sovereign wealth funds in financing the infrastructure development required for the IMEC. (250 Words)
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Previous Year Questions
1. With reference to the “G20 Common Framework”, consider the following statements: (UPSC 2022)
1. It is an initiative endorsed by the G20 together with the Paris Club. 2. It is an initiative to support Low Income Countries with unsustainable debt. Which of the statements given above is/are correct? (a) 1 only (b) 2 only (c) Both 1 and 2 (d) Neither 1 nor 2 Answer: C
2. In which one of the following groups are all the four countries members of G20?
(UPSC 2020)
A. Argentina, Mexico, South Africa and Turkey
B. Australia, Canada, Malaysia and New Zealand
C. Brazil, Iran, Saudi Arabia and Vietnam
D. Indonesia, Japan, Singapore and South Korea
Answer: A
3. Read the statements (A) and (R) and choose the correct option. (CTET 2022)
Assertion (A): The Roman empire carried out trades with South India.
Reason (R): Roman gold coins have been found in South India.
A. Both (A) and (R) are correct and R is the correct explanation of A.
B. Both (A) and (R) are correct and R is not the correct explanation of A.
C. (A) is true, but (R) is false.
D. (A) is false but (R) is true.
Answer: A
4. Who was the first emperor of the Roman Empire? (ACC 122 CGAT 2020)
A. Tiberius B. Mark Antony C. William Shakespeare D. Augustus
Answer: D
5. Comprehension (SSC CGL Tier 2 2020)
Directions:
Read the passage and answer the questions that follow.
The Roman Empire covered a vast stretch of territory that included most of Europe as we know it today and a large part of the Fertile Crescent and North Africa. The Roman Empire embraced a wealth of local cultures and languages; that women had a stronger legal position then than they do in many countries today; but also that much of the economy was run on slave labour, denying freedom to substantial numbers of persons. From the fifth century onwards, the empire fell apart in the west but remained intact and exceptionally prosperous in its eastern half. Roman historians have a rich collection of sources to go on, which we can broadly divide into three groups: (a) texts, (b) documents and (c) material remains. Textual sources include letters, speeches, sermons, laws, and histories of the period written by contemporaries. These were usually called ‘Annals’ because the narrative was constructed on a year-by-year basis. Documentary sources include mainly inscriptions and papyri. Inscriptions were usually cut on stone, so a large number survive, in both Greek and Latin. The ‘papyrus’ was a reed-like plant that grew along the banks of the Nile in Egypt and was processed to produce sheets of writing material that was very widely used in everyday life. Thousands of contracts, accounts, letters and official documents survive ‘on papyrus’ and have been published by scholars who are called ‘papyrologists’. Material remains include a very wide assortment of items that mainly archaeologists discover (for example, through excavation and field survey), for example, buildings, monuments and other kinds of structures, pottery, coins, mosaics, even entire landscapes. Each of these sources can only tell us just so much about the past, and combining them can be a fruitful exercise, but how well this is done depends on the historian’s skill!
Which of these statements is NOT true?
A. Archaeologists make discoveries through excavations.
B. Inscriptions were carved in Greek and Latin
C. The Roman empire flourished longer in the west.
D. Texts, documents and material remains were the main sources for the historians
Answer: C
6. In the first century AD, which among the following was not a major item of Indian exports to Rome? (CDS GK 2018)
A. Pepper B. Spikenard C. Tortoiseshell D. Nutmeg
Answer: D
7. Pepper was as valued in Roman Empire that as it was called (CTET 2013)
A. Black magic B. Black charm C. Black stone D. Black gold
Answer: D
8. In the middle of the first century BC, under ________, a high-born military commander, the ‘Roman Empire’ was extended to present-day Britain and Germany. (SSC JE CE 2017)
A. Alexander B. Julius Caesar C. Xerxes D. Caligula
Answer: B
9. Comprehension
Direction: Read the passage carefully and select the best answer to each question out of the given four alternatives.
The Silk Road was a network of trade routes which connected the East and West, and was central to the economic, cultural, political, and religious interactions between these regions from the 2nd century BCE to the 18th century. The Silk Road primarily refers to the land routes connecting East Asia and Southeast Asia with South Asia, Persia, the Arabian Peninsula, East Africa and Southern Europe. The Silk Road derives its name from the lucrative trade in silk carried out along its length, beginning in the Han dynasty in China. The Silk Road trade played a significant role in the development of the civilizations of China, Korea, Japan, the Indian subcontinent, Iran, Europe, the Horn of Africa and Arabia, opening long-distance political and economic relations between the civilizations. Though silk was the major trade item exported from China, many other goods and ideas were exchanged, including religions (especially Buddhism), syncretic philosophies, sciences, and technologies like paper and gunpowder. So, in addition to economic trade, the Silk Road was a route for cultural trade among the civilizations along its network. Diseases, most notably plague, also spread along the Silk Road. Some remnants of what was probably Chinese silk dating from 1070 BCE have been found in Ancient Egypt. The Great Oasis cities of Central Asia played a crucial role in the effective functioning of the Silk Road trade. The originating source seems sufficiently reliable, but silk degrades very rapidly, so it cannot be verified whether it was cultivated silk (which almost certainly came from China) or a type of wild silk, which might have come from the Mediterranean or Middle East. Archeological sites such as the Berel burial ground in Kazakhstan, confirmed that the nomadic Arimaspians were not only breeding horses for trade but also great craftsmen able to propagate exquisite art pieces along the Silk Road.
According to the passage, The Silk Road primarily refers to the land routes connecting to one another. Which routes were not linked by it? (DSSSB Junior Stenographer 2021)
A. East Asia with Southern Europe
B. East Asia with South Asia
C. South America and South Africa
D. East Asia with Persia
Answer: C
10. The term “Silk Route” in the ancient period refers to (CTET 2022)
A. the travelling route of traders from China to other countries carrying silk.
B. Sea routes connecting countries in which silk traders sold their products.
C. roads connecting all the countries in which mulberry plants were cultivated.
D. road and sea routes in which silk products were traded.
Answer: A
11. Who started the ‘Silk-route’ (Marg) for Indians? (UKPSC RO/ARO 2016)
A. Kanishka B. Harshwardhan C. Ashok D. Fahien
Answer: A
12. With reference to ancient South India, Korkai, Poompuhar, and Muchiri were well-known as (UPSC 2023)
A. capital cities B. ports C. centres of iron-and-steel D. making shrines of Jain Tirthankaras
Answer: B
13. Two thousand years ago, a trader narrates that he has been to Gaza, Petra and Apologos. Which of the following trade routes has he travelled through? (CTET 2022)
A. Route controlled by Roman emperors
B. Route under the rulers of Persia
C. Route controlled by Kushanas
D. Route under the rulers of China
Answer: A
14. Red sea is an example of: (UPPSC Civil Service 2017)
A. Volcanic valley B. Eroded valley C. Axial trough D. U-shaped valley
Answer: C
15. In which Indian state was the ancient sea port 'Muziris' located? (UP Police SI 2017)
A. Kerala B. Gujarat C. Karnataka D. Tamil Nadu
Answer: A
16. Regarding the Indus Valley Civilization, consider the following statements: (UPSC 2011)
1. It was predominantly a secular civilization and the religious element, though present, did not dominate the scene.
2. During this period, cotton was used for manufacturing textiles in India.
Which of the statements given above is/are correct?
A. 1 only B. 2 only C. Both 1 and 2 D. Neither 1 nor 2
Answer: C
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Source: The Hindu
