Despite diplomatic tensions, why Indian companies are pouring millions into Azerbaijan; what it means for New Delhi’s expanding footprint

Even as there has cautious political relations between the two countries, India’s investment in Azerbaijan rose to $56.047 million in 2025, up 29.8 percent from 2024. Over the past decade, Indian investment in the country has increased from $480 million to $1.26 billion.

New Delhi: Political differences have not slowed the growing economic engagement between India and Azerbaijan. Diplomatic ties have seen phases of disagreement, and business relations between the two countries continue to expand. Indian companies are increasing their investments and strengthening their presence in Baku’s economy.

Data released by Azerbaijan’s central bank shows that Indian investment in the country reached $56.047 million in 2025. That is $12.9 million more than what was recorded in 2024, taking the growth to nearly 29.8 percent. The increase points to rising interest from Indian companies, particularly in sectors such as energy, logistics, pharmaceuticals and information technology. Businesses in these areas are exploring fresh opportunities and expanding their footprint in Azerbaijan.

Indian investments see strong growth

The trend over the past decade paints an even clearer picture of strengthening economic engagement. A recent report by the Eurasian Development Bank (EDB) said that Indian investment in Azerbaijan has witnessed substantial expansion over the years. In 2016, it stood at approximately $480 million. By the end of the first half of 2025, it climbed to $1.26 billion.

This growth shows that Indian companies are increasingly looking at Azerbaijan as a long-term destination for expansion in the Caucasus region. The country’s strategic location between Europe and Asia has become a major attraction, giving Indian businesses access to new trade routes and emerging markets. Azerbaijan’s growing role as a logistics and transit hub is also prompting Indian companies to explore export opportunities across Central Asia, Eastern Europe and other nearby regions.

The EDB report also highlighted Azerbaijan’s assistance in facilitating the evacuation of nearly 200 Indian citizens from war-affected Iran. It added another dimension to the evolving ties and pointed to cooperation that extends beyond trade and investment.

Limited Azerbaijani investment in India

Indian investments in Azerbaijan have grown over the years, although capital flowing the other way has been limited. In recent years, there has been no major investment from Azerbaijan into India. This suggests that there is still plenty of room for Azerbaijani investors to explore opportunities in the Indian market, especially in areas such as energy partnerships, infrastructure development and trade connectivity.

Indian companies are finding growing opportunities in Azerbaijan across sectors such as oil and gas, logistics, pharmaceuticals and IT services. At the same time, the country’s infrastructure push and its expanding role in regional connectivity projects are encouraging more Indian businesses to look at long-term partnerships and strengthen their presence in the market.

Diplomatic differences, economic ties move ahead

Even as economic ties grow stronger, diplomatic differences continue to influence the relationship. Azerbaijan has publicly backed Pakistan’s position on Kashmir, a move India sees as interference in its internal affairs. Azerbaijan’s military and political ties with Turkey also add another layer to the equation, especially as Ankara has often voiced strong views against India on sensitive issues.

Another factor influencing the diplomatic equation is Azerbaijan’s long-standing tension with Armenia. India has supplied defence equipment to Yerevan, adding another layer of complexity to regional alignments involving Baku.

Despite these political undercurrents, economic engagement between India and Azerbaijan continues to move forward. Indian investments are expanding, companies are exploring new opportunities and trade corridors are drawing greater interest. The numbers suggest that while diplomacy follows its own path, business ties between the two countries are building momentum.