India, the European Union, the United States and Saudi Arabia announced a mega deal to establish the India-Middle East-Europe Economic Corridor (IMEC) on the sidelines of the G20 summit on Saturday. The leaders of India, Italy, France, Germany, the United States, the European Union and Saudi Arabia signed the memorandum of understanding.
While announcing the corridor at the G20 summit, Prime Minister Narendra Modi said that IMEC will usher in a new chapter in global connectivity and sustainable development. He also stated that the corridor would act as a "major medium of economic integration between India, West Asia, and Europe”.
The project will be developed under the G7 nations’ Partnership for Global Infrastructure Investment (PGII) initiative. PGII aims to bridge the infrastructure gap in developing countries. The new IMEC project is being seen as a response to China’s Belt and Road initiative. While the cost of the project has not been officially announced, reports indicated that the countries might spend around $20 billion on developing the corridor.
According to the official information, the new project will consist of two corridors. The east corridor will connect India with Gulf countries and the northern corridor will connect Arabian Gulf with Europe.
The corridors will consist of a ship-to-rail transit network to facilitate cost-effective transport routes for the countries. The memorandum of understanding read,” It will enable goods and services to transit to, from, and between India, the UAE, Saudi Arabia, Jordan, Israel, and Europe.” The countries also plan to lay down a cable network for electricity and digital connectivity along with pipes for clean hydrogen export.
EU President Ursula von der Leyen said that IMEC will be the most direct connection between the countries and it is expected to cut travel time by 40 per cent. US President Joe Biden called the project “a big deal”.
The speculations around the corridor had emerged back in May when the national security advisors (NSAs) of the United States, India, Saudi Arabia, and the United Arab Emirates met in Riyadh. US NSA Jake Sullivan had said in his statement that the officials discussed a “shared vision of a more secure and prosperous Middle East region interconnected with India and the world”.
The corridor is being seen as India’s counter to China’s Belt and Road Initiative (BRI). Since the Galwan Valley clash of 2020, the relations between the two neighbours have deteriorated. Along with imposing several restrictions on Chinese firms, India has been trying to woo manufacturing companies away from its neighbours. In this direction, the government has introduced several incentive schemes to attract global companies who are wary of geopolitical tensions between the US and China.
The Modi government has also been criticised by the opposition for not doing enough to counter China’s growing influence. At a press conference held on Friday, Rahul Gandhi called on India, Europe and the United States to collaborate to develop an alternate and competitive production model for China.
He said, “China is proposing a particular view or particular vision of the planet. They are putting on the table the idea of the Belt and Road. And one of the reasons they can do that is because they have become a centre of global production.” The Congress leader argued that an alternate vision is not being presented from India’s side which can successfully counter the Chinese model.
The IMEC initiative could prove to be an impetus to the government’s plan to boost exports of the country. Amidst global headwinds, India’s exports declined by 16 per cent to $32 billion. The recently released quarterly estimates for GDP data also showed that the share of exports in GDP went down to 20.9 per cent from 24.4 per cent in the same period last year.
The announcement of the project comes at a time when the United States is engaged in a geo-economic competition with China. As part of the efforts to counter China, the Financial Times recently reported that the Biden administration is working to expand the lending capacity of the World Bank by $25 billion for middle and low-income countries.
The BRI project, which is also known as One Belt One Road (OBOR), was launched by Chinese President Xi Jinping in 2013. Through OBOR, China aims to establish a vast network of railways, energy pipelines, and highways to connect countries across Asia, Africa, Europe and Latin America. As per China’s foreign ministry, it has signed cooperation documents for the project with over 150 countries and 30 international organizations.
Notably, the announcement of IMEC came a month ahead of the third BRI conference which is being held in Beijing this year. China has confirmed that around 90 countries have confirmed their presence at the conference which will be held in October. Serbian President Aleksandar Vucic and Argentine President Alberto Fernandez are among those who are attending.
However, China’s BRI received a shock last month when Italy announced that it is looking to withdraw from the project. Italy’s defence minister called the decision BRI in 2019 “an atrocious decision”, according to The Guardian report. However, Italian PM Giorgia Meloni said at the G20 summit that it has not been decided whether the country would quit the initiative. However, she argued that doing so would not damage bilateral relations. Italy had become the first G7 country to join the initiative back in 2019.
While the European country is looking to exit China’s project, it has agreed to participate in the IMEC initiative.
The Belt and Road initiative has also been a major point of contention between India and China as parts of the economic corridor are planned to cross through Pakistan-occupied Kashmir.
Recent reports have also indicated that all is not well for China’s flagship initiative. According to a Wall Street Journal report, the country is looking to launch a BRI 2.0 which will rein in the spending on projects and scrutinise the announcement of new projects. This comes amid the slowdown in economic growth globally amidst rising interest rates and inflation.
According to the Centre for Global Development, China is expected to spend $8 trillion on the project, which has often faced accusations of laying down a “debt trap” for low-income countries. According to estimates, the country has already spent over $1 trillion. India, through the IMEC initiative, is trying to offset the effects of BRI by establishing a direct link with some of its major trading partners. The project is also expected to boost employment opportunities in the countries part of this deal. It remains to be seen whether IMEC will be able to counter the vast network China is aiming to build by spending trillions of dollars.