IMEC Momentum To Boost Karnataka Exports Amid Global Trade Disruptions

Karnataka’s exporters are set to benefit as the India-Middle East-Europe Economic Corridor (IMEC) gathers momentum as an alternative to traditional maritime choke points, a senior tax official said, pointing to shifting global trade routes amid ongoing geopolitical tensions.

Addressing a seminar on “Navigating Geo-Political Challenges: Policy Measures and Preparedness to Build Resilience,” Kotraswamy M, Commissioner of Central Tax, Bengaluru North, said disruptions around key routes such as the Strait of Hormuz and the Suez Canal had underscored the need for more reliable corridors.

The event was organised by the Bangalore Chamber of Industry and Commerce (BCIC) in association with the Indian Institute of Materials Management.

"Owing to geopolitical tensions in West Asia, connectivity was hindered with Strait of Hormuz and Suez Canal as the choke points. Now with India-Middle East-Europe Economic Corridor (IMEC) gaining momentum as alternatives to the choke points, exporters from Karnataka and other states in India stand to gain in the global trade market," Kotraswamy said.

With this development, several critical choke points, especially fuel-related disruptions are expected to increase, he said adding IMEC is now gaining momentum as a more efficient and more reliable pathway, instead of depending on routes like the Suez Canal, the Strait of Hormuz, or even the Cape route, which are costly in terms of freight and sailing time, Kotraswamy said.

He added that exporters were also seeing gains from policy measures under the Goods and Services Tax (GST) regime.

“As exports are treated as zero-rated supplies under GST, the effective tax incidence on exports is zero per cent, allowing businesses to claim refunds on input taxes paid,” he said.

Kotraswamy noted that over 90% of refund claims were now processed within seven days, compared to 15 to 30 days earlier.

He further said recent recommendations had enabled automatic refund processing and reduced documentation, cutting compliance costs by 20 to 25% and easing working capital pressures.

Highlighting the state’s export performance, Prince Mehra of EXIM Bank said Karnataka is the fourth-largest exporter in India, contributing around seven per cent to the country’s merchandise exports and recording a compound annual growth rate of 7.8% from FY19 to FY25.

“In FY25, Karnataka’s exports stood at $30.5 billion, driven by telecom instruments (17.3%) and petroleum (14%), followed by electrical equipment (five per cent), RMG/apparel (4.7%), electronics (4.2%), coffee (4.1%) and pharmaceuticals (3.8%),” Mehra said.

He added that the state ranked sixth in NITI Aayog’s Export Preparedness Index 2024 with an untapped export potential of $24.4 billion.

Emphasising the need for adaptability, K Ravi, senior vice president of BCIC, said in today’s volatile global landscape, resilience is no longer optional as it is a strategic imperative. Geopolitical challenges are reshaping trade dynamics and compelling businesses to rethink risk, cost, and continuity.

Sivasankari Murugan of ECGC highlighted support mechanisms available to exporters, including insurance products and policy interventions such as the RELIEF Scheme and the Export Promotion Mission.

She said such measures reflected a strong commitment to safeguarding industry competitiveness, and added that platforms like the seminar help stakeholders build the collaborative mindset required to navigate uncertainty.