Afghanistan India- Economic Ties in the Framework of Strategic Partnership Agreement


Afghanistan- India’s bilateral relation dates back to history and has been strengthened over the years. Afghanistan’s foreign policy has emphasized on the regional cooperation, penetrating across the globe through integration mechanism for prosperity and development. The Strategic Partnership Agreement signed between India and Afghanistan in 2011 has been an important step towards cementing the relation which encompasses development, improving trade and investment and humanitarian assistance. The SPA comprises of four Joint Working Groups in the areas of political and security issues; trade, commerce and investment; development cooperation; and human resource development, education and culture.

Trade & Economic Cooperation:

  1. The Sides commit to strengthening trade, economic, scientific and technological Cooperation, as well as cooperation between other bodies of business and industry representatives, with a view to expanding trade and economic relations; 2. In the interest of Afghanistan’s sustainable development, and furthering economic Interdependence between the two countries, the Sides commit to deepening and diversifying cooperation in sectors such as agriculture, rural development, mining, industry, energy, information technology, communications, transport, including civil aviation, and any other areas that the Sides may agree on. 3. The Sides agree to take effective measures to create a favourable environment to promote trade and investment. The measures shall include, among others: (a) Enhancing investment protection; (b) Simplifying customs and other procedures, [and] promoting the removal of non-tariff barriers, and gradually lowering tariff barriers; (c) Work towards the creation of air-cargo facilities for promotion of commercial exchange; (d) Cooperating in the areas of banking and finance, and improving credit and insurance facilities; and (e) Enhancing cooperation and coordination at international trade, economic and financial bodies. 4. To achieve a sustained expansion of bilateral trade and economic ties with a long term perspective, the Sides will establish effective mechanisms for interaction between Indian and Afghan entities. Specific measures will include: (a) Encouraging contacts between regions/provinces in both countries with a view to promoting trade, economic and cultural cooperation; (b) Mandating the relevant bodies of countries to jointly explore the possibilities of regional trading arrangements with third countries; (c) Further enhancing the quality and international competitiveness of their goods by, promoting cooperation between the institutions of quality assurance and standardization, and on new technologies; and (d) Encouraging greater cooperation between the Chambers of Commerce and Industries of both countries. 5. Recognizing that regional economic cooperation is vital to the future economic prosperity of individual nations, the Sides agree to cooperate, both bilaterally and through regional organizations in promoting regional economic cooperation. Regional economic cooperation shall: (a) Envisage assisting Afghanistan emerge as a trade, transportation and energy hub connecting Central and South Asia and enabling free and more unfettered transport and transit linkages; (b) Focus on development of regional infrastructure projects; 4.(c) Help facilitate the integration of the Afghan economy within the South Asian and global economies by opening markets for Afghan and Indian products for mutual benefit; and (d) Strengthen regional cooperation under SAARC, of which both sides are members.

 Afghan-Indo bilateral trade relations are scaling new heights which will bring prosperity to both the nations. Afghanistan-India bilateral relation is based on shared vision with an objective to promote peace, security, stability and prosperity of mutual interest. The announcement of 1 USD billion in September 2017 for the New Development Partnership project has added new highs for the near future.


Development Cooperation:

The strategic partnership between Afghanistan and India encompasses on the bilateral development cooperation. India’s US$ 2 billion aid project in Afghanistan for humanitarian assistance that includes development in social, economic and infrastructure growth in Afghanistan.

The Indo-Afghan ‘New Development Partnership’ has added new dimension for both the countries. The 116 High Impact Community Development Projects to be implemented in 31 provinces of Afghanistan, including in the areas of education, health, agriculture, irrigation, drinking water, renewable energy, flood control, micro-hydropower, sports infrastructure, administrative infrastructure. India’s development cooperation with Afghanistan has been its Small Development Projects (SDPs) scheme. Through this scheme, Indian government has undertaken (or committed to) more than 200 projects with short gestation periods in diverse fields including public health, education, community infrastructure development, agriculture, vocational training etc.

116 – New Projects

  1. Shahtoot dam and drinking water project
  2. Low cost housing for returning Afghan refugees in Nangarhar Province to promote resettlement
  3. Road connectivity to Band-e-Amir in Bamyan Province that would promote tourism to the National Park and economic development
  4. Water supply network for Charikar city in Parwan Province
  5. Gypsum board manufacturing plant in Kabul to promote value added industry
  6. Construction of a polyclinic in Mazar-e-Sharif.


India-Afghanistan Small Development Projects:

The objective of the small development project is to enhance sustainable livelihood for the people of Afghanistan by creating opportunities for infrastructural development and to facilitate the local communities with education, health benefits and boosting agro-industry, renewable energy, trade, transport and communication, recreation and community development sectors. The SDP will cover almost 34 provinces in Afghanistan. The Small Development projects are designed to be implemented in phases which are funded by the Ministry of External Affairs, Government of India. The third phase of 116 new “high impact” development projects will be implemented jointly in 31 provinces of Afghanistan. India has affirmed of starting 100 small development projects in Afghanistan this year and the estimated cost of the project will be around $16-17 million.

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