As Prime Minister Narendra Modi arrives in Tehran with the clear intent of raising India’s relations with Iran to a new level, he is likely to find that the Islamic Republic has lots to offer in terms of economic engagement.

Among Iran’s attractions are a young, well-educated and largely urban population of 80 million and the world’s 17th most-populous market, reports the November 2015 edition of The Economist . The country has competent farmers, car-makers, drug firms and a fairly sophisticated service sector.

Modi’s first trip following the lifting of nuclear-related sanctions against Iran in January 2016 has seen a recent blitzkrieg of visits, the two most recent being that of External Affairs Minister Sushma Swaraj and Petroleum Minister Dharmendra Pradhan. While these have laid the groundwork, the meeting between Modi and President Hassan Rouhani in Ufa, Russia, in July 2015 provided a broad roadmap for the future. A visit by Iran’s minister of foreign affairs in August 2015 and the India-Iran Joint Commission meeting with Iran’s minister of economy and finance in December 2015 has seen several welcome decisions taken to strengthen economic cooperation.

There are positive vibes to complement this opportunity, flowing from an agreement between Iran and India to settle their outstanding crude oil dues in rupees in preparation for future trade in their national currencies and active work on increased connectivity in the banking sector.

The port factor A key deliverable would be finalisation of the deal for co-development of the strategically important Chabahar Port riding on an Indian commitment to invest $20 billion. A multiplier effect rests on the possibility that other international investors may also see the rationale of this important investment, facilitating a greater flow of people and goods in the region and contributing to the economic growth of Afghanistan.

The development of the port will facilitate access for Indian goods to Afghanistan and Afghan goods access to Indian Ocean sea lanes, and give an edge to India’s trade with Iran. In the long run, Chabahar will rationalise transport costs and freight time from India to Central Asia and West Asia, and also serve as the point of origin for the proposed Iran-Oman-India pipeline.

Industry is hoping for movement on big-ticket opportunities in infrastructure. Iran is planning to invest about $25 billion in modernising and expanding its rail network and there are great possibilities of cooperation in railways, including supply of rails, rolling stock, signalling and other works and India’s participation in Chabahar-Zahedan-Mashhad railway line. Indian companies should look at participating in a proposed undersea pipeline connecting Chabahar to India’s western coast which will give Indian companies an opportunity to develop their own trans-national and inter-continental pipeline expertise.

That apart, there are some lucrative possibilities of collaboration in the development of the Chabahar Free Trade Zone (FTZ), setting up industrial units in the FTZ and establishing a gas-based urea plant at Chabahar which would cut India’s domestic urea prices by half. Indian oil companies have shown interest in investments for a petrochemicals plant in Iran to access cheap natural gas as feedstock and a gas-based 500,000-tonnes-per-year smelter complex and an associated power plant.

Gas exploration The critical area of hydrocarbons has tremendous scope. There is need to bring to fruition the long-pending deal for the development of Iran’s Farzad-B gas field containing 12.5 trillion cubic feet of natural gas discovered by the ONGC Videsh Ltd-led consortium of Oil India Ltd and Indian Oil Corporation. Left unexplored due to western sanctions, the development of Farzad-B gas field serves both India’s foreseeable growth dynamics and Iran’s need for $200-billion worth investments for its energy sector.

There is an understated imperative to restore the vitality of the trade ties which have seen a sharp downswing in recent times. It is important that government and industry look at sectors such as food, pharmaceuticals, gems and jewellery, auto components, textiles, apparels, rubber goods, plastics and medical equipments where India’s export capability coupled with the huge demand in Iran could restore the balance in trade.

Indian companies should take advantage of their presence on the ground to be ahead of other international players making a beeline for Iranian shores. In that respect, Modi’s visit to Iran sends out a clear message — India wants to strengthen economic ties with Tehran and leverage the changing geo-political situation. There is a lot of fuel to fire up the intent.

The writer is the president of Ficci

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