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India-Uzbekistan relations have flourished on the bedrock of mutual respect and shared values deeply rooted in centuries-old cultural connections. New Delhi has pursued a consistent strategy to elevate the relationship and underscore the region's strategic and economic importance. Prime Minister (PM) Narendra Modi's visit to Uzbekistan in 2015 advanced the strategic partnership and enhanced economic relations. In the last 10 years, the trade between the two countries has seen an upward trend from US$ 316.7 in 2014 to US$ 689.7 in 2023. According to the Statistics Agency of Uzbekistan, India exported goods worth US$ 254.5 million to Uzbekistan in the first four months of 2024. The increased trade is an outcome of high-level political engagements between the two countries that significantly strengthened economic and strategic relations. Still, New Delhi’s strategic and economic interests in the region remained curtailed due to Pakistan’s unwillingness to allow India access through its territory. India must work towards expediting connectivity projects to facilitate continued trade growth and investments.
India-Uzbekistan relations
India and Uzbekistan have a long history of sociopolitical and economic engagement dating back to the Kushan period, facilitated by the Silk Route. After the breakup of the Soviet Union and the formation of independent Central Asian Republics (CARs), New Delhi redefined its ties with the region. The CARs were experiencing an economic crisis, and India provided much-needed economic aid. In 1993, then-Prime Minister Narasimha Rao visited Uzbekistan and Kazakhstan. In 2012, India’s coherent approach towards the region was concretely manifested in its Connect Central Asia policy—aimed at enhancing economic, cultural, and political ties. The PM's visit in 2015 gave fresh momentum to the Connect Central Asia policy and set the motion for the next stage of cooperation. In 2019, Samarkand was chosen for the first historic India-Central Dialogue at the Foreign Minister’s level to reaffirm ties between the two regions.
India and Uzbekistan have a long history of sociopolitical and economic engagement dating back to the Kushan period, facilitated by the Silk Route.
The reciprocal visits by President Shavkat Mirziyoyev of Uzbekistan, in 2018 and 2019 underscored India's position as Tashkent's top foreign policy priority. In 2020, the President of Uzbekistan and the Indian PM met virtually and imparted new dynamism to the strategic relationship. In 2022, the inaugural India-Central Asia virtual summit took place, and during the same year, PM Modi attended the Shanghai Cooperation Organisation (SCO) Summit in Uzbekistan. The PM of India resolutely met with the President of Uzbekistan at COP28 to significantly strengthen the bilateral relationship and broaden areas of partnership between the two countries in 2023. Table 1 shows how the mutual visits by the leaders and diplomats of both countries over the last five years have strengthened diplomatic, infrastructure, and investment relations, and paved the way for several bilateral trade agreements.
Source: Compiled by the authors
Increasing trade needs Preferential Trade Agreement (PTA)
In 2018, during the visit of the Uzbek President to India, both countries decided to start work on PTA to increase bilateral trade, investment flows, and joint business activities. In 2020, both countries signed 98 trade and investment agreements worth US$2.3 billion in bilateral cooperation. Additionally, New Delhi initiated a credit line for Uzbekistan to support development projects such as infrastructure and information technologies. The figure below shows how the India-Uzbekistan bilateral trade has nearly doubled over the past five years in the wake of these high-level visits and the signing of new trade and investment agreements. Uzbekistan stands as a regional powerhouse, leveraging its growing young population and consistently adding fresh blood to its workforce each year. The projected real GDP growth stands at an estimated 5.4 percent and 5.5 percent for 2024 and 2025, respectively. Data indicates a significant increase in trade between the two countries and indicates a promising future for India-Uzbekistan trade, with the potential for further growth and increased investments.
In 2018, during the visit of the Uzbek President to India, both countries decided to start work on PTA to increase bilateral trade, investment flows, and joint business activities.
India has already invested in pharmaceuticals, automobile components, and the hospitality industry, amongst others The bilateral investment treaty for promoting and protecting investments between both countries is fully negotiated and needs to be signed and implemented. Mirziyoyev has implemented numerous measures to expedite market reforms and to harmonise the national legislation with WTO agreements. Uzbekistan will join the WTO in 2026 as part of its economic reform efforts to open the economy for global investments and trade. India should expedite the negotiations on the PTA with Uzbekistan to increase the trade that favours India’s growth in the manufacturing sector. For example, New Delhi exports goods worth US$584.1 million and imports only US$105.7 million in 2023 from Uzbekistan. India's main exports to Uzbekistan include services, mechanical equipment, optical instruments, pharmaceutical products, vehicle parts, and equipment. Imports include juice products, extracts, fruit and vegetable products, fertilisers, lubricants, and services.
Source: Ministry of External Affairs, India.
Growing convergence on connectivity
While bilateral trade and ties between the two countries hold immense promise, the lack of direct connectivity has hampered its potential. Amid increasing Chinese influence in the region, India has continued to work to solve its connectivity problem with the hydrocarbon-rich and strategic area since 2015. India signed a Memorandum of Understanding with Iran to develop the Chabahar Port in the Iranian province of Sistan-Balochistan. The goal was to improve connectivity and trade with Central Asia and Eurasia. However, progress on the Chabahar Port and the important 628-km Chabahar-Zahedan railway line on the Eastern Route of International North-South Transport Corridor (INSTC), which connects India with Central Asia, faced delays due to renewed United States (US) sanctions on Iran, bureaucratic hurdles, and interregional disputes.
While bilateral trade and ties between the two countries hold immense promise, the lack of direct connectivity has hampered its potential. Amid increasing Chinese influence in the region, India has continued to work to solve its connectivity problem with the hydrocarbon-rich and strategic area since 2015.
Proposed in 2002 by India, Iran and Russia, 13 Eurasian countries have ratified the INSTC. The Eastern Route of INSTC, also known as the KTI corridor, connects India with Central Asia via Iran. Construction of the Eastern Route began in 2009 following a trilateral agreement in 2007, with the Islamic Development Bank contributing US$370 million of the project’s total cost of around US$1.4 billion. India also joined the Ashgabat agreement in 2018 to improve regional connectivity.
On 13 May, India and Iran signed a ten-year agreement to operate and develop Chabahar port. Under this agreement, India Port Global Limited will invest around US$ 120 million and US$ 250 million in credit for mutually identified projects aimed at improving infrastructure around Chabahar. Once the Chabahar-Zahedan railway line is completed in 2025, it will offer strategic access to Central Asia via the Eastern Corridor of INSTC. Uzbekistan is a double landlocked country and 80 percent of its trade passes through Russian territory. The war in Ukraine has forced Tashkent to look for new trade routes, especially Chabahar and INSTC. Given the increasing strategic importance of India-led connectivity projects, Uzbekistan established a trilateral working group with India and Iran on the Chabahar port in 2020. In 2022, leaders from Central Asia have expressed their support for the proposal to include the Chabahar port within the framework of INSTC. The leaders agreed that connectivity projects should be transparent, based on local priorities, and respect member countries' sovereignty and territorial integrity.
The Chabahar port in Iran and the PTA are not just initiatives, but urgent and significant steps towards enhancing trade and investment between India and Uzbekistan. India is expected to become a major global manufacturing hub with the potential to export up to US$1 trillion by 2030. This development could significantly increase Indian exports to Uzbekistan and Central Asia. Recognising Uzbekistan's central role in Central Asia, New Delhi views its growing relationship with Uzbekistan as essential to its vision for an integrated extended neighbourhood policy. India's increasing engagement with the Chabahar port reflects New Delhi's aim to establish affordable direct connectivity to promote bilateral trade with Uzbekistan and the whole of Central Asia.
Ayjaz Wani is a Fellow in the Strategic Studies Programme at the Observer Research Foundation.
Kanwar Simar Singh is a Research Intern at the Observer Research Foundation.
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