Executive Summary

This report assesses the current scale, constraints and strategic implications of commerce between India and the Central Asian states, based on the recent findings published by the Eurasian Development Bank and India Exim Bank.

Bilateral trade increased from approximately $500 million in 2010 to between $1.7 and $2.0 billion in 2023, primarily because of Indian exports of pharmaceuticals and machinery, as well as Central Asian exports of energy and fertilisers.

Principal constraints are deficient land and sea corridor integration and limited trade finance for SMEs; completion of the International North–South Transport Corridor (INSTC) and the Chabahar terminal agreement are central to any near-term expansion.

Key Takeaways

1. In 2023, trade in goods between India and Central Asia was around $1.7 billion, with the total reported value nearing $2 billion, a significant increase from roughly $500 million in 2010.
2. Kazakhstan supplies the bulk of Central Asian exports to India (64.5% of India’s imports from the region in 2023), while Uzbekistan accounts for over 45% of Indian exports into the region.
3. Principal barriers are logistics (scarce direct land routes, long maritime detours) and trade finance gaps for small and medium enterprises; resolving these could unlock an estimated additional $2 billion of trade potential.

Background Information

According to the Eurasian Development Bank, regional GDP grew at roughly 4.5%, India grew at approximately 6%, and the Central Asian region’s GDP almost doubled since 2010. Reported trade values note India–Central Asia merchandise turnover at $1.72 billion in 2023, and a near $2 billion figure cited in parallel reporting.

The composition of flows is asymmetric: Indian exports to Central Asia concentrate on pharmaceuticals (37.9%), electrical machinery and equipment (12.1%) and other machinery (10.4 %). Central Asian exports to India concentrate on mineral fuels and oil (35.3%), fertilisers (21.3%) and inorganic chemicals (13%).

The Suez and Black Seas are major shipping routes, but using them increases transit times and expenses, which impacts logistics.

The Eurasian Development Bank and India Exim Bank’s collaborative efforts emphasise supporting the International North-South Transport Corridor (INSTC) and improving connections with ports in the Caspian Sea and Iran. India signed a 10-year agreement in May 2024 to manage the Chabahar terminal in Iran. Exim Bank expects around $2 billion in untapped trade potential, but only if small and medium-sized enterprises can more easily access trade and insurance products.

Geopolitical Scenario

India’s engagement with Central Asia intersects with multiple external constraints and competing imperatives. On the operational level, geography remains the primary barrier: the absence of direct land connections obliges reliance on costly maritime detours via the Suez Canal and Black Sea, or on unstable transit options through Afghanistan and Pakistan.

Security risks tied to terrorist activity in Afghanistan, unresolved India–Pakistan hostility, and periodic military escalations along the Kashmir frontier constrain the reliability of overland links.

The political and legal risks, such as the sanctions linked to Iranian networks, create more uncertainty, even though India’s decade-long management of the Chabahar port boosts the INSTC’s practical functionality.

The strategic imperatives driving India are threefold.

1. Securing diversified energy and resource inflows from Central Asian republics.
2. Expanding export markets for Indian pharmaceuticals, machinery and electrical equipment, with Uzbekistan and Kazakhstan as commercial gateways.
3. Establishing reliable transit corridors to Europe that reduce overdependence on contested maritime routes.

Central Asian states require access to maritime routes and varied trade partners to lessen dependence on Russian or Chinese corridors. In India-Central Asia cooperation, Iran plays a significant role since Tehran positions itself as a critical hub: Chabahar and the INSTC reinforce its ambition to act as a transit bridge linking South Asia, Central Asia and Europe.

The geopolitical environment complicates these ambitions. China’s Belt and Road Initiative is currently funding and managing many transport and infrastructure projects throughout Central Asia, securing Beijing’s influence in both business and politics. The development of trade and transportation between India and Central Asia offers an alternative and sets an example for local governments on how to collaborate with foreign partners, going beyond just Chinese funding.

Turkey, leveraging the Organisation of Turkic States, aims to expand its cultural and economic footprint in Central Asia. Ankara might view stronger Indian involvement as a competing influence. Russia, traditionally the major power in the region’s security and trade, is in a difficult situation. India is a key ally of Moscow in energy and defence. However, New Delhi’s collaboration with Washington in the Asia-Pacific could worry Moscow about India’s influence in Central Asia, an area Russia sees as its own.

Scenarios and Forecasting

India-Central Asia cooperation might develop in these scenarios:

1. Incremental corridor development – India advances the INSTC through Chabahar and Caspian linkages, supported by selective Central Asian states, while trade volumes grow gradually but remain constrained by sanctions exposure. The increasing role of the INSTC will provide positive outcomes also for Russia and Iran.
2. Chinese predominance sustained – Belt and Road projects continue to dominate Central Asian connectivity, limiting India’s capacity to scale trade and influence unless cooperation between Moscow, New Delhi, Tehran and Central Asian republics improves the INSTC financing.
3. Multi-vector balancing – Central Asian states diversify partners, encouraging India’s trade and investment as a complement to Chinese and Russian links, using competition among external powers to secure favourable financing.

Indicators to Monitor

1. The operational data of Chabahar port, including container and bulk cargo volumes, as well as service frequency.
2. Formal progress on INSTC projects and connectivity with Caspian and Iranian ports (signed agreements, construction milestones, customs protocols).
3. Changes in modal share: volumes transiting via Suez/Black Sea versus Caspian–INSTC routes and direct air freight volumes for pharmaceuticals.
4. Deployment of trade-finance instruments (export credit, guarantees, factoring) by India Exim Bank and regional banks aimed at SMEs.
5. Security incidents or changes in Afghan transit security and any reported military escalations affecting corridor safety.

Conclusion

Trade between India and Central Asia has expanded markedly since 2010 but remains constrained by logistical and financing bottlenecks. Kazakhstan and Uzbekistan are the main commercial hubs in the region for trade with India.

Achieving the extra $2 billion in trade, as mentioned, demands synchronised infrastructure projects (particularly the INSTC connection and efficient use of Chabahar), aligned regulations in key areas like pharmaceuticals, and specialised trade-finance tools for small and medium-sized businesses.

Monitoring the indicators above will provide early confirmation of progress or renewed constraints. Focus should be on securing the corridor, handling legal and sanctions risks, and taking practical steps to lower logistics costs and insurance hurdles.