Indo-African Trade – Beyond Rhetoric

The air is filled with promise and the news headlines are loaded with words like Resurgence, Renewal and Renaissance. I am talking about the recently concluded Indo-African summit in New Delhi, where 54 African nations deliberated on how India and Africa can complement each other in economic, technological and trade growth. While it can be termed as political re-packaging, history seems to be more spontaneous and natural.

Trade ties between India and Africa, dates back to 16th century, when Indian traders, using the seasonal monsoon winds, sailed to the East coast of Africa in search of mangrove poles, elephant tusks and gold & gemstones. Over the years, trade ties thrived on export of coffee, cotton etc. from Africa and import of manufactured goods & grains such as rice, pulses & textiles from India. So practically, the Indo-African trade existed long back and was continuing until recently. The question is why in the last few years (1st Indo-African Summit was organized in New Delhi in 2008) this has become so important for both sides? Simply put – It has got lot to do with how the world order has been changing and how the participants are responding to that effect. There are primarily two dimensions to this resurgence in bonhomie and they are somewhat inter-related.

Since mid-20th century, Africa has been dependent on aids and donations from West & Europe, who have imposed favorable pre-conditions for themselves keeping the rich African resources in mind. Even post-colonial era, many African nations are left constrained to make decisive policy changes to curb modern day colonization. With growing education levels and rising call for true democracy in Africa, many African presidents have been running out of time to bring about policy changes for resource protection and employment generation. So until recently, African trade which used to be substantial with West and Europe, have started to tilt towards EAST led by China and India. Africa finds EAST as a natural counter balance for the trap that it has been into and it could not have come at a better time when Western and European economies are struggling.

While both China and India, latched on to the opportunity, Sino-African trade took a much larger share of the pie compared to that of Indo-African. Chinese economy, as has been primarily investment led, focused on investing in African infrastructure, logistics etc. through state-to-state deals whereas Indian investment in Africa was primarily led by private players facilitated by trade bodies like EXIM, FIEO, CII etc. Chinese policy attracted a lot of applaud, initially, with many African countries welcoming Chinese investment. However, of late, there has been growing perception that there is hardly anything for the local economy through state-to-state deals other than political mileage. For example – in many infrastructure/real estate projects assigned to Chinese companies/government, the later have employed their citizens (moved all the way from China along with supplies that they consume during the project duration). Such arrangements, in part, have antagonized Africans and have provided a preferential trade platform for Indian players who have invested in Africa on commercial merits and have also identified trade partners who are not necessarily from Indian origin. At the same time, India’s merchandise imports have reached ~$450 Bn in 2015, out of which oil & gold imports account for $~150 billion which has forced New Delhi to attribute higher weightage to Africa taking focus off Middle East.

India, today, at its scorching pace of growth, not only demands more resources/commodities from Africa but also needs to tap the vast market (Africa is the 2nd largest & fastest growing continent in the world) for its exports. Hence, it’s no wonder that New Delhi is turning its focus with multiple schemes and credit lines. The increasing convergence of interests, values and a burgeoning web of win-win opportunities in the current context provide a solid platform to the 1.25 Bn populations each of India and Africa.  While Indo-Africa trade (~$72 Bn) is still small compared to that of Sino-Africa, EU-Africa trade, there is an increasing level of confidence that is brewing between both sides for a sustainable future and the world is watching with anticipation.

 

Know more about the author, Partha S Dash

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