Indian Ocean trade: There is a papyrus that changed how historians think about ancient trade. Discovered in a sunken ship off the coast of Kerala more than a decade ago, the Museiris Papyrus is, at its heart, a commercial invoice—a detailed list of goods ordered by a Roman merchant from a trader at Museiris, then one of India’s most important ports. Scholars who have studied the document have calculated, from the quantities and values listed, that the taxes levied on Indian trade alone accounted for roughly one-third of the total revenues of the entire Roman Empire. One third. From a single trade route. Two thousand years ago.
It is a number that should reframe how India thinks about its relationship with the Indian Ocean Region (IOR) today. Not as a peripheral concern, not as a secondary theatre to rivalries in the Indo-Pacific or the Himalayas, but as the original arena of Indian economic power—an arena that is now, urgently and unmistakably, asking to be reclaimed.
READ | Maritime reforms need enforceable seafarer protections
A world coming apart at the seams
The timing of this argument matters as much as the argument itself. The world that globalisation built—integrated supply chains, predictable shipping lanes, open multilateral trade—is under sustained assault. The Russian invasion of Ukraine disrupted grain and energy markets. Houthi attacks in the Red Sea forced hundreds of vessels to reroute around the Cape of Good Hope, adding weeks to transit times and hundreds of millions of dollars in costs. More recently, tensions around the Strait of Hormuz have raised the spectre of disruption to the flow of Gulf energy exports. Each of these flashpoints sits along—or controls access to—the Indian Ocean.
Three chokepoints define the IOR’s vulnerability: the Strait of Malacca to the east, Bab-el-Mandeb to the west, and Hormuz at the top of the Persian Gulf. All three have been tested in recent years. All three could be tested again. For India, whose seaborne trade accounts for 95% of its international commerce by value, this is not an abstract geopolitical concern. It is an economic existential question.
The answer, argue economists Dr. Arvind Virmani and Ms. Shruti Sabharwal in a newly published paper, is not to simply defend those chokepoints but to reduce dependence on them—by building a thick web of economic integration within the Indian Ocean itself. Trade that moves between Colombo and Mombasa, between Mumbai and Muscat, between Perth and Port Louis does not need to pass through a contested strait. Regional integration is, in this framing, also strategic resilience. “Trade that moves within the Indian Ocean does not need to pass through a contested strait. Regional integration is strategic resilience.”
A region hiding in plain sight
The Indian Ocean Region is not a marginal zone awaiting development. Its 23 core economies—from South Asia through the Gulf, East Africa, and island states to Australia—collectively account for roughly 11% of global GDP, 14% of global goods trade, 13% of global services trade, and fully one-third of net global FDI inflows. Some 100,000 ships traverse the region’s waters each year, carrying 30% of the world’s containerised cargo and 42% of globally traded crude oil.
READ | Maritime India Vision looks to deliver a blue economy boom
And yet, intra-regional trade remains astonishingly underdeveloped. Econometric analysis using a gravity model—applied to 23 core IOR countries over a decade—reveals significant unrealised bilateral trade potential between India and a range of partners including Bangladesh, Sri Lanka, Kenya, Mauritius, Australia, and the Maldives. The gap between what is traded and what could be traded is explained not primarily by tariffs, which are already relatively low, but by non-tariff barriers: divergent regulatory standards, cumbersome licensing regimes, weak logistics infrastructure, and limited shipping connectivity. The IOR’s internal shipping network operates at just 25% of its potential—compared to 37% for North America. The infrastructure deficit is, paradoxically, an opportunity.
India’s diaspora adds another underexploited dimension. With 18 million Indians living abroad—the world’s largest diaspora—and remittances reaching $137 billion in 2024 (approximately 3.5% of GDP), India possesses a human connectivity network that spans the entire IOR. Research shows that countries with stronger people-to-people links with India trade more with India. Gulf states, the Indian subcontinent, and Indian Ocean island economies score highest on this human connectivity index—and are precisely the partners with whom the greatest trade gap exists.
Indian Ocean trade strategy
The paper’s most practically important contribution is a phased roadmap toward integration, drawn deliberately from the European experience. Europe did not build a common market by declaration. It began, in the 1950s, with a narrowly defined Iron and Steel Community—a functional arrangement around shared resources that forced governments to develop habits of cooperation. Only then did the architecture expand.
The IOR equivalent, the paper proposes, is an Indian Ocean Energy and Minerals Community. The region is richly endowed: Australia and South Africa export large volumes of mineral ores largely outside the region; UAE, Kuwait, and Saudi Arabia ship enormous quantities of energy globally, much of it at an “Asian premium” that suppresses regional demand. An energy and minerals community would facilitate long-term supply agreements, reduce those premiums, and establish a three-stage value chain—extraction, processing, manufacturing—that generates regional economies of scale. Abu Dhabi’s Khalifa Industrial Zone (KIZAD), which already serves as a hub for metals, petrochemicals, and food processing, is a living proof of concept.
By 2035, the paper envisions a multilateral IOR Free Trade Agreement or Comprehensive Economic Partnership Agreement, harmonising standards and customs procedures. By 2045–2050, a full Indian Ocean Common Market allowing free movement of capital and professional services. Ambitious, certainly. But no more ambitious than what Europe achieved from a continent ravaged by two world wars—and with the added advantage that the IOR has no comparable history of large-scale military conflict between its members.
India’s UPI network and its growing diaspora are not soft-power footnotes. They are the payment rails and the trust networks that make a regional economic bloc viable.
The digital and monetary dividend
Two enabling forces emerged in the webinar discussion that deserve particular emphasis. The first is India’s Unified Payments Interface. With bilateral UPI agreements already in place with 20–30 countries, India is quietly building the settlement infrastructure for a regional economic community. Real-time, low-cost cross-border payments would dramatically accelerate trade transactions and remittance flows, while reducing dependence on dollar-denominated correspondent banking—a vulnerability that has become increasingly salient as the United States has demonstrated willingness to weaponise financial access.
The second is the long-term internationalisation of the Indian rupee. A deeper IOR trade bloc, in which partner economies run structural surpluses with India and therefore accumulate rupee balances, would organically generate the conditions for reserve currency status. The euro’s rise to become the world’s second reserve currency, despite fierce initial opposition from Washington, shows that this is achievable over a generation—provided the underlying economic architecture is solid.
READ | Maritime Development Fund: Big promises, but will it close implementation gaps?
Reclaiming the ocean
India stands at a rare confluence of historical legitimacy, geographic centrality, demographic weight, and technological readiness. The Indian Ocean is not simply the body of water that surrounds India’s peninsula—it is, in a deep sense, India’s natural economic sphere. The world is fragmenting into regional blocs: Europe has the EU, East Asia gravitates toward China’s orbit, the Americas have their own web of agreements. The Indian Ocean Region risks being the last major theatre without a coherent institutional architecture—a vacuum that others will be happy to fill.
The paper by Dr. Virmani and Ms. Sabharwal does not ask India to conjure a common market overnight. It asks for something far more achievable: a first step, a functional community around energy and minerals, built on existing trade ties, diaspora networks, digital payment rails, and the hard-won trust of shared history. If that first step is taken deliberately and sustained over two decades, the rest of the architecture can follow.
Two thousand years ago, Indian merchants understood that the monsoon wind was not a threat to be feared but a force to be harnessed—a natural mechanism that could carry ships outward and bring them home laden with trade. The geopolitical winds of today are turbulent and unpredictable. But India’s moment in the Indian Ocean, if seized with clarity and purpose, could prove just as consequential as those ancient trade winds once were. The ocean has always been India’s. The question is whether India is ready to claim it.
Excerpts of a paper by Dr Arvind Virmani and Ms Shruti Sabharwal, presented at a conference organised by EGROW Foundation.