Key Details
The IMF working paper Alternative Trade Corridors of the GCC: The Case of IMEC models how a proposed sea–rail–sea route across the Arabian Peninsula could compete with shipping through the Suez Canal.
Central-Scenario Finding | Estimated Effect |
|---|---|
India–EU shipping costs | Almost no average reduction, despite shorter routes to some destinations |
India’s containerised exports | 1.7% increase overall; exports to the EU decline by 2% |
India’s containerised exports to the US | 19.4% increase, where the route offers a greater advantage |
Country pairs with lower trade costs | Costs fall 3.6% on average among those affected; nearly 96% of all pairs see no reduction |
Largest regional gains | Gulf economies and Jordan benefit most from improved overland connections |
A Shorter Route Does Not Necessarily Make India–Europe Shipping Cheaper
Announced in 2023, the India–Middle East–Europe Economic Corridor (IMEC) envisages shipping goods to the Gulf, moving them by rail across the Arabian Peninsula and shipping them onward to Europe. The paper tests that route against existing maritime shipping, accounting for both freight charges and the value of faster delivery.
The distinction is important for India. The model finds that IMEC could shorten the India–Greece route by about 12%, yet the rail leg would raise freight costs by 17% on that journey. Across India–EU trade, the time advantage is generally too small to produce a meaningful average reduction in shipping-related trade costs.
The Gulf Gains More; India’s Results Depend on the Destination
The rail connection offers Gulf economies and Jordan a more direct route across the peninsula. India, by contrast, already has direct sea links with most Gulf markets. The model therefore projects little cost advantage for much of India–Gulf trade, though Saudi Arabia is an exception because the corridor can improve access to its Red Sea coast.
India’s projected trade response is mixed: containerised exports to the EU fall by 2%, while those to the US rise by about 19%. The paper estimates a 1.7% increase in India’s containerised exports overall. These changes reflect both new cost advantages and shifts in countries’ relative competitiveness; they are not forecasts of actual exports once IMEC is built.
Freight Rates and Border Delays Could Change the Result
The central scenario assumes rail freight costs 93% more than sea freight. Results change markedly when that relative price changes. Smooth transfers and border crossings matter too: adding a seven-day delay reduces the number of bilateral routes on which IMEC beats the Suez route from 1,974 to 137 in the model.
The paper examines trade in goods suitable for container shipping and uses 2019 trade data as its baseline. It does not provide a full construction-cost assessment or estimate the corridor’s potential value when established maritime routes are disrupted.
Policy Relevance
The findings sharpen the case for judging IMEC route by route, rather than assuming that a shorter India–Europe journey will benefit all Indian exporters. Freight prices, cargo-handling time and cross-border procedures will determine where businesses find the corridor worth using.
For India, a credible investment assessment would also need to weigh those routine commercial gains against construction and operating costs and the potential value of an alternative route during maritime disruptions. The working paper leaves that broader strategic and financial judgement open.
Follow the Full Paper Here: Alternative Trade Corridors of the GCC: The Case of IMEC