India-Middle East-Europe Economic Corridor, announced at G20, gives New Delhi new purchase in West Asia. But a lot will depend on delivery, and India’s economic performance
The spectacular G20 summit in New Delhi could be termed as India’s coming out party. Not dissimilar to the 2008 Summer Olympics in Beijing, which was widely seen as China’s grand message of “arrival”. Curiously, in many aspects of national power, China 2008 and India 2023 have several analogues – not least in aggregate GDP measures, where China 2007 and India 2022 are at very similar levels!
Perhaps not entirely coincidentally, the biggest brass-tacks outcome of G20 was the India-Middle East-Europe Economic Corridor (IMEE-EC). A multi-modal connectivity initiative to link India with Europe via ports and rail corridors built in the Middle East (ME). It will, in theory, provide an alternative to the current trade connectivity through the Suez Canal. In conception and design, it looks to be an alternative to China’s ambitious BRI. An Indian
BRI
(Boats and Rail Initiative) to challenge China’s BRI? Sounds compelling beyond the wordplay, especially as China’s BRI runs into rough weather, including in the Indian subcontinent, primarily on financial sustainability issues.
Do you mean that only India has to pay that suez fee and that's why it's not a viable competitor for Chinese exports?
I'm not as clear on all the specifics as you are, so when you refer to certain corridors, we're transmitting the Suez. I'm not sure what you're talking about all the time.
Is the fee that India has to pay more costly than the advantage they get if they start ramping up manufacturing andshipping same amount of goods to the west twice as fastest China?
Or do you mean at their current manufacturing capacity a new trade corridor doesn't do India any good?
Nobody really cares about speed of shipping. People generally either need things fast or in high volume: if fast, you might as well fly it over; if in high volume, you might as well use a ship. You can design your supply chain around the shipping time with basically no cost: that's the principle behind JIT.
People care about volume and price, things which this corridor don't really affect. This corridor isn't going to be cheaper than transiting through the Suez, and because of that reason (if nothing else) it's DOA.
Shipping speed is not as irrelevant to import and export companies as you claim and I think you're underestimating the significance of geoproximity with respect to trade in general.
The thrust of the article is that India has the ability and now a plan to trade more freely with Western Europe than it ever has if the IMEEC-EC is successfully implemented.
Your contention is that because the immec-ec prop is not cheaper than the route China uses through the Suez canal, it is DOA, and therefore India will not become an export challenger to China.
By "not cheaper", are you implying that the imeec-ec will definitely be prohibitively more expensive then China's transit through the suez or that the difference in cost will be negligible as the new trade route is constructed and used?
Is there any estimate for updated freight costs from India if this corridor is enacted?
You're assuming speed as if containers can roll off a boat and straight onto a train like a game of Factorio. As it stands, IMEC would require two ocean freight legs with a transfer on rail. That means that, instead of requiring 2 port stops, it takes 4 (!). Each port stop takes a tedious amount of time (up to 1-3 days if all goes well) and the time to transit the Suez is only, what, 12-16 hours? Sure, maybe you save 5 days by not having to go around the Arabian Peninsula, but those savings are pretty quickly eaten up by port time.
I'm saying that IMEC isn't even cost-competitive for India relative to the Suez, nevermind China.
Plus, at a peak throughput of 30 trains per day (and assuming 240 containers per train double-stacked because we're limit testing here), that's only a third of the capacity of a typical container ship passing through per day. In comparison, the Suez can handle 50 ships per day with ease.
I'm not going factorio here, I'm just trying to get information.
Thanks for the numbers, I had to keep looking up costs and distances and everything but that makes sense to me, the exorbitant multiple loading times.
I thought you were comparing India's potential to specifically China, but you're focusing on the Indian cost of multiple port entries versus just going through the Suez canal that already works fine.
So why would India try to build their own EC when the suez canal is right there? It's touted as cost effective in the articles that are written about it, do you think India is just blowing smoke in order to get investment for it, even though they know it won't be cost effective?
Are they somehow getting different calculations than you are, knowingly or otherwise?
Or do we circle back to your original comment? And it's probably going to just be used for fuel and largely domestic trade between the Middle East and India rather than a more transcontinental purpose?
I'm pretty sure it's the latter: the corridor makes a lot of sense, but not for the reasons people are touting. It's not really connecting India to Europe so much as it is connecting India to the Middle East and Europe to the Middle East. It's getting past some of the key challenges of moving goods to and within the Arabian Peninsula, but connecting India to Europe through it would be silly given that the Suez already exists.
AFAIK it's mostly been the US/EU that's been pushing the narrative that the corridor will connect India to Europe... obviously, given geopolitical tensions with China. Meanwhile, global shopping organizations and shipping analysts treat it as niche product for Europe-India trade.
I wouldn't say it's blowing air so much as it is a method of getting Western funding - you say the words "compete with China" and suddenly the US and EU are willing to throw billions of dollars at you.
Edit: It might be beneficial specifically for perishables because I'm sure you could do some smart container placement and logistical management (using smaller container ships, unloading perishables first), but that's a rather niche market because the two ocean freight legs aren't exactly short... so the items have to be perishable, but not too perishable, and not valuable enough for air freight.
Yeah, when I said blowing smoke I should have said creating a buzz so that they could get investing.
It'll just be a good way to get India improving trade in general and they can figure out what to do with the corridor how they want to do it after they get it funded and built.
I was also wondering about perishable goods while we were talking about the shipping route itself, wondering if transporting perishables would make a difference in the utility of the corridor, but can't see that it would given the amount of countries that would make sense to transport perishables to given the time it would take to transport them.
It'll definitely be interesting to see if they actually get the corridor functioning. Good luck, India.