An equal partnership

On trade and economic front, it's a win-win situation for both sides and provides a great platform to promote South-South cooperation.
Last Updated : 06 November 2015, 18:30 IST

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The third India-Africa Summit that concluded at New Delhi recently is a vindication of the growing relationship evolving between these two countries. It’s a landmark event in the sense that for the first time 54 African nations participated and exhibited a deep sense of commitment towards promoting economic, trade and cultural relations.

The Indian government's determined effort to evolve strong economic and trade relations with Africa is obvious in its initiatives. In 2008, India held its first India-Africa summit. Thereafter, a second summit in 2011 at Addis Aba and various conclaves and meetings indicated that both sides were eager to establish and nurture a strong relationship.

First, let’s take a look at trade. India-Africa economic and trade relations have witnessed a surge. Currently pegged at $69 billion in 2015, it’s poised to rise further, as is clear from the fact that the first two quarters of this financial year have already registered significant bilateral trade. India's major African export destinations are South Africa, Mauritius, Nigeria, Egypt, Tanzania etc. and its major importing partners are Nigeria, South Africa, Congo and Tanzania.

According to Department of Commerce, region wise distribution of India’s exports to Africa today witness East Africa receiving about 31 per cent followed by Southern Africa 27 per cent, West Africa 21 per cent and North Africa 17 per cent. Similarly, imports from Africa to India registered about 38.5 billion and major imports came from West Africa (52 per cent) and Southern Africa(33 per cent).

Indian government’s current proposal to initiate 140 new projects in the areas of infrastructure, education and healthcare in Africa will give further boost this new global partnership. Line of credit offered by Indian EXIM bank to Africa is also an important initiative towards participating in the latter’s development.

Of late, the basket of exports has diversified. Africa has exported mineral fuels, mineral oils and products, copper ore, natural or cultured pearls, precious and semi-precious stones, coffee, coconut, edible fruit and nuts etc. India, the world's largest importer of rough diamonds, sources most of what it requires from Africa. Similarly, India's exports constitute a wide variety of products, including cotton, iron, steel, nuclear reactors, boilers, machinery, mechanical appliances, frozen bovine meat etc.

As part of measures to promote bilateral trade, India has committed itself to a duty-free preferential tariff scheme for 49 least-developed countries. Of these, 33 are in Africa. The country’s efforts to attain developmental goals through the Doha round for all developing and least-developed-countries is largely supported by African countries in forming G-20, G-33 blocs. It is promoting South-South cooperation to counter the North.

Second, overseas investment is becoming an instrument of global integration. Indian investments in Africa have multiplied in recent years and are currently pegged at around $35 billion dollars.The energy sector has received a large chunk of this and so have the manufacturing and services sectors. India’s quest for resources as means to energy self-sufficiency has been an important reason for investing in Africa.

In terms of manufacturing, Indian investment has gone into apparel, agro-processing, power generation, road construction and the growing services sector. Indian businesses have found Africa to be a familiar ground in that it is similar to other emerging markets and also easy to compete in, unlike industrialised countries. Major investors include ONGC, Essar, Tata, BhartiAirtel, Zydus, Ranbaxy, TCS and Infosys among others.

Sourcing of raw material for Indian companies has put pressure on price levels because of competition from China and this in turn, has benefited Africans. Numerous Indian companies have gone into the extraction sector and this has provided employment to many Africans. Besides, Indian operations in Africa have helped its countries to integrate with the global market. E-education and telecommunications have strengthened the continent’s social sector.

Role of private sector
Significantly, India’s private sector has played a pivotal role in the expansion of trade relations. The chambers of industry such as the Confederation of Indian Industry (CII) and Federation of Indian Chambers of Commerce and Industry (FICCI) have, through regular trade conclaves, provided a platform for the corporate sectors of India and Africa to interact and forge business ties. They are spread across sectors such as telecommunications, information technology, hydrocarbons and agriculture.

Over the years, there has been a similar interest in engaging with Africa among the Chinese, the Americans and the Europeans. The value of Africa’s trade with China was approximately $210 billion in 2013 while that with the United States was $85 billion. However, recent decline in oil imports from the US and sluggishness in the Chinese economy may push Africans closer to India.

In its commitment towards becoming equal partners, India concluded this summit by promising to extend a line of credit of $10 billion at a concessional rate for a period of five years to the continent, besides extending grant assistance of $600 million for development-related, economic and capacity building. India’s proposal to provide scholarship to African students to train in the country is a good initiative. India wishes to deepen its cooperation in maritime security and hydrography and countering terrorism and extremism.

Post-summit expectations are running high. India, in the near future, would like to strengthen its relation with Africa in the hope of obtaining full African solidarity to seek permanent membership in the UN Security Council. To what extent this would be useful is not quite clear.
On trade and economic front, it’s a win-win situation for both sides and provides a great platform to promote South-South cooperation which should in a way challenge and counter the sinister move of the US in trade through Trans-Pacific Partnership agreement (TPP).

(The writer is Professor, Lal Bahadur Shastri Institute of Management and former Senior Faculty, Indian Institute of Foreign Trade, New Delhi)

Published 06 November 2015, 18:15 IST

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