Syllabus: 

GS2: Effect of Policies and Politics of Developed and Developing Countries on India’s Interests, Indian Diaspora.

Context: 

The recent Israel-Iran conflict has put India’s regional connectivity strategy, such as the International North-South Transport Corridor (INSTC), in the spotlight.

About INSTC

• The INSTC was initiated by Russia, India and Iran.
• It is a multi-modal transportation project linking the Indian Ocean and Persian Gulf to the Caspian Sea via Iran and onward to northern Europe via St Petersburg in Russia.
• This corridor aims to reduce transit times to about 25 days — 20 days fewer than the Suez Canal route and cut freight costs by 30 percent.
• The INSTC envisions transporting goods from Mumbai to Iran’s Bandar Abbas by sea, then by road to the Caspian port of Bandar-e-Anzali. 
• From there, cargo moves by ship across the Caspian Sea to Astrakhan in Russia and continues by rail to various destinations in Russia and Europe.
• Currently, there are 13 Members of INSTC (India, Iran, Russia, Azerbaijan, Armenia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkey, Ukraine, Belarus, Oman and Syria).
• Bulgaria has joined as an Observer State. 

Significance and Potential Benefits

• It provides India an opportunity to exploit the untapped export potential that exists in the INSTC member countries, especially the Central Asian countries.
• The INSTC presents a viable alternative to the conventional routes to the Eurasian region. 
• Lower costs and faster delivery can stimulate higher volumes of trade, particularly for goods like agricultural products, textiles, machinery, and energy resources.
• The corridor fosters greater connectivity and interdependence among diverse nations, potentially leading to enhanced political stability and cooperation.

Challenges 

• While progress has been made, certain sections of the rail and road network, particularly in Iran, require further development and modernization.
• Regional instability and security risks in certain stretches of the corridor could pose challenges to smooth operations.
• Efficient cargo movement requires streamlined customs, harmonized regulations and minimal bureaucratic hurdles across borders.
• Securing adequate and sustained funding for infrastructure upgrades and operational improvements remains a key challenge.

Way Forward 

• Banking and insurance facilities: A clear US statement exempting transit goods via Chabahar from sanctions would boost foreign bank participation in payments. Since global insurers remain hesitant, national insurers should step in without extra premiums or restrictive clauses.
• Efficient inter-modal transfers: While the TIR Convention permits all INSTC members to trade seamlessly under a single document, efficient systems would be needed to reap full benefits. 
• Strengthening hinterland connectivity: Key missing links like the Rasht–Astara and Chabahar–Zahedan railways must be fast-tracked. INSTC members should create a framework to finance such critical infrastructure for the corridor's success. 
• Realising export potential: INSTC members need to boost awareness of trade opportunities, address non-tariff barriers regularly, and share information on standards and regulations to ease market access.

Mains Practise question

India’s strategic interests in Eurasia hinge significantly on the operationalisation of the International North-South Transport Corridor (INSTC)." Discuss the geopolitical and economic relevance of INSTC for India in the context of emerging global realignments. (15M,250W)