Taliban led rule and its shaping of economy

-Penned by Priyank Tantia and Varnika Gupta

All across the world, people watched with horror as events unfolded in Afghanistan with the Taliban toppling the government and seizing control of the nation. Everyone wondered what will be the future of Afghanistan and its people? How will the newly formed Taliban rule affect the economy in major neighbouring countries? This week’s Macroscan explores the intricacies of the newly formed government led by the Taliban and its role in shaping the economies of China, India and the US.

Recent Activities

A fortnight ago, on 14th August, a pall of gloom descended on the state of Afghanistan as the US backed Afghan Government was toppled by the extremist outfit Taliban with American troops withdrawing from the country after months of diplomatic talks. The idea of withdrawal of American troops from the war ridden Afghan soil was floated by the Trump Administration, which had initiated peace talks with Taliban in the hope of ending the conflict. With the new Biden regime, also agreeing with the previous government, the process of American troops withdrawal was initiated with an assurance that Taliban would not take over Afghanistan. However, the harsh takeover by the Taliban within the next 35 days of the assurance, made people residing in the country scramble to the airport in hope of getting out of the country fearing their lives.

To understand the resurgence of Taliban deeper, let us look into the history of formation of Taliban and its progress over the years.


The Taliban, which signifies “students” in the Pashto language, was founded in 1994 around the southern Afghan city of Kandahar. It was one of the groups battling a common battle for control of the nation following the withdrawal of the Soviet Union and the ensuing breakdown of public authority. It initially drew individuals from so-called “mujahideen” warriors who repulsed Soviet powers during the 1980s, with help from the United States.

Within the space of two years, the Taliban had captured a large portion of the nation, announcing an Islamic emirate in 1996 with a brutal understanding of Islamic law. After 5 years, following the Sept 11, 2001 assaults in the United States by Al-Qaeda, US-backed forces in the north, cleared into Kabul in November under the front of hefty US airstrikes. The Taliban dissolved away into distant regions, where it started a 20-year insurrection against the Afghan government and its Western partners.


During the five years in power, the Taliban implemented a severe execution of sharia law. Ladies were banned from working or studying and were bound to their homes, unless joined by a male watchman. Public executions and floggings were routine with various restrictions on the way of living.

The Taliban: International recognition:

Just four nations, including neighbor Pakistan, officially perceived the Taliban government when it was in power. By far, most other nations, alongside the United Nations, recognized the group holding territories toward the north of Kabul as the legitimate government-in-waiting. The United Nations and the US forced sanctions on the Taliban, and most nations gave little indication of officially recognizing the Taliban.

Impact of the new Taliban Rule

The recent fall of Afghanistan at the hands of Taliban rattled the entire world, with different countries reviewing their policies and taking necessary preventive measures to safeguard their citizens and civilians stranded in the region. Below we have analysed the impact on the economy on three major countries including The United States of America(USA), China and India.

Impact on India

India did not perceive the Taliban system in Afghanistan and kept up with close key and military ties with the Northern Alliance to contain the ascent of the Taliban during the 1990s. India widely upheld the new organization in Afghanistan and by 2001 had arisen as the country’s most significant local contributor

For India, the house-of-cards collapse of the 20-year-old Afghan government addresses an essential mishap and a stinging embarrassment. Since 2001 India has spent a non-trifling $3bn to reinforce the American-introduced system. It constructed streets, dams, electrical cables, facilities, and schools across the nation. It prepared Afghan officials, including ladies, in its military tactical foundations. It offered grants to thousands of students.

Other than losing all its investment, India has lost all its vital strategic leverage. There were never Indian soldiers in Afghanistan. However, its guide ventures and four consulates unquestionably scared the commanders managing everything in Pakistan. When Pakistan-supported Islamists terrorists caused assaults on India and created violence in various areas of Kashmir, India could take steps to utilize its Afghan resources for the strategic inconvenience in Pakistan’s fretful district of Balochistan. Presently, with Mr. Modi’s Hindu-patriot government having caused its difficulties in Kashmir by stripping the district of self-governance in 2019, it should confront the possibility of another age of Muslim Kashmiris roused by the Taliban’s obsession.

Impact on US

The United States never perceived the Taliban government in Afghanistan. Ahmed Rashid states that the U.S. helped the Taliban through its partner in Pakistan between 1994 and 1996 because Washington saw the Taliban as hostile to Iran, against Shia, and possibly supportive of Western. The Taliban regime unraveled rapidly in 2001. After the fall of Kabul the United Nations invited major Afghan factions to install an interim administration. After that, Afghanistan witnessed a war for 20 years between the Taliban and Afghanistan Government supported by its western allies.

After the withdrawal of troops recently in August 2021 by the US President Biden, the so-called forever war came to an end. This announcement came as the negotiations between the Taliban and the Afghan Government were at a deadlock. Biden has said that the US will continue to assist the Afghan Forces to support and maintain peace. But with the fall of the Afghan Government, there are questions floating whether the withdrawal of troops was a right decision. Biden commented that though the decision of withdrawal was right, it became a little messy because of the failure of the Afghan security forces. The future impact of this decision on the US political and economic scenario is yet to be seen.

Impact on China

Over the years, relations between Kabul and Beijing have been warm and friendly with trade relations existing between the two nations. However, the ties with the Taliban are based on a shaky ground, especially considering the ties of Taliban with East Turkmenistan Islamic Movement(ETIM), which is in direct opposition to China being accused of forced labour against Uyghur Muslims. Even though there are recurring reports on attacks on Chinese workers by Taliban sponsored violence, China has maintained a working relationship with the group since 2001. With Taliban seizing power in the region and forming the government in Kabul, China has viewed the unfolding of the events with trepidation. On 25th August, after the formation of Taliban government, China held a diplomatic dialogue with the Taliban, which was termed to be “unimpeded and effective communication”.

Even though China has been cordial to the Taliban, analysts are of the opinion that it is an expression of concern. One narrative suggests that the turn of events with American troops withdrawing from Afghan soil, is an opportune time for Beijing to jump and plunder the Afghan soil of its rich mineral resources and rare metals. In return, China can assist in building its infrastructure and industry. However many suggest that it won’t be on the priority list of China, as it will be more concerned about its domestic security and avoiding spillover of extremism into its borders especially Xinjiang region with majority of Uyghur Muslims. In short, Beijing remains concerned that Afghanistan doesn’t once again become a source of regional instability as it did in the 1990s. We are yet to see how the situation proceeds forwards and how China reacts.


With the establishment of the Taliban regime, there has been a sense of dread and foreboding amongst people, especially the civilians stranded in Afghanistan. With Afghan soil currently a ticking time bomb, it is yet to be seen how things will play out in the long run. Increase in cross border terrorism activites is expected, which may encourage neighbouring nations to burn their pockets while keeping check of the same. It is unsure that the rise of the Taliban will create havoc for the rest of the world or will come out as a boon in disguise. Till then, this question will loom around, “ What will be the impact of the rise of Taliban on World Economics?”


Aishwarya | Ayush | Bhavya | Jayati | Shivika | Varshita

Apoorva | Jeevan | Priyank | Rajdeep | Sakshi | Shelly | Varnika

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