Datanomics: How India-Afghanistan ties have shifted under Taliban 2.0

India cautiously renews economic engagement with Afghanistan, balancing humanitarian aid and trade ties without extending formal recognition to the Taliban regime

With tensions rising between its neighbours Pakistan and Afghanistan, India this week reaffirmed support for the latter’s stability and promised economic cooperation. Since the Taliban’s return in 2021, India’s economic engagement with Taliban has seen a shift — from robust development aid and trade during former president Ashraf Ghani’s regime, it is now more pragmatic. India’s plans to upgrade its Kabul mission and reopen visa services, along with the recent meeting between External Affairs Minister S Jaishankar and his Taliban counterpart Amir Khan Muttaqi, indicate a cautious effort to rebuild ties. 

 

India’s aid to Afghanistan fell after 2021

 

India’s technical and economic cooperation (TEC) aid to Afghanistan dropped significantly after 2021. From ₹676 crore in 2015-16 under Ghani, allocations fell to ₹200 crore by 2022-23 — a decline from over 6 per cent to below 3 per cent of total TEC spending. This marks a clear transition from large-scale reconstruction and development aid to limited humanitarian and technical assistance. 

 

Trade deficit emerges under Taliban

 

India’s trade equation with Afghanistan has changed significantly since the Taliban’s return. Exports declined from $999.5 million in 2019-20 to $434 million in 2022-23 — creating India’s first trade deficit with Afghanistan since 2000-01. Exports declined further to $319 million in 2024-25, while imports surged to a record $691.4 million. This trend reflects India’s restrained but continuing economic engagement.