World Economy

Manifold Growth in India-Africa Trade

Manifold Growth in  India-Africa TradeManifold Growth in  India-Africa Trade

The 4-day India-Africa Forum Summit, which kicked-off Monday, Oct. 26,  is one of New Delhi’s most ambitious diplomatic outreach events in over two decades.

This is not the first meeting of the India-Africa Forum. The United Progressive Alliance began at a modest scale with the then prime minister Manmohan Singh hosting some African leaders in 2008. This was followed by another forum summit in Addis Ababa in Ethiopia in 2011, on an even smaller scale. But the third India-Africa Summit, will be an extravaganza in keeping with Prime Minister Narendra Modi’s personal preference for mega shows, NewsNow reported.

Much is being made of the fact that leaders of all 54 African countries have been invited and that the majority of them have agreed to attend the heads of states meeting slated for October 29-30.

Indian officials say it will be the largest gathering of African leaders outside the continent.

Senior officials meeting which began on Monday is devoted to working out a development charter for what India and Africa can do together. This will be finalized and made public at the end of the summit at the gathering of heads of states slated for October 29-30.

Agriculture is the next big thing New Delhi is looking at in Africa. This will probably come up for discussions at the summit.

On the eve of the Third India-Africa Forum Summit in New Delhi, Indian Prime Minister Narendra Modi sought to reaffirm the “strong emotional link” between the Asian nation and Africa.

“The relations between India and the countries of Africa, these relations and these bonds that we have, are not just political and economic but we also have a very rich cultural tradition,” Modi told an African journalist. “I am convinced that during this summit and following the summit, we are going to have very important decisions which will give both India and Africa a new sense of self-confidence. Our relations are going to become closer and deeper.”

India is Africa’s fourth-largest trading partner, after China, the US and the European Union.

  $75b Trade

Bilateral trade between India and Africa has risen massively in the past decade, from $8.2 billion in 2004 to $75 billion in 2014. However, India’s imports from Africa grew at an average annual rate of 35% in this period, while exports only rose by an average annual rate of 23%.

This has resulted in a rising trade deficit with Africa. Trade surpluses stood at $ 1.4 billion in 2004, and turned deficit at $ 5.7 billion in 2014, according to a working paper by Export Import Bank of India.

India currently maintains the largest trade deficit with Nigeria, Angola, Botswana, Gabon, Equatorial Guinea, Morocco, Cameroon, Guinea, South Africa and Cote d’Ivoire

A recent study shows that high export potential to Africa include machinery, electronic equipments, transport vehicles, petroleum oils, and products of iron or steel. Africa also stands to gain from an increase in imports of such intermediate goods from India, with a potential for high value-added production.

Currently, mineral fuels, oils and distillation products are the largest items in India’s export basket, accounting for 33% of India’s exports to Africa in 2014.

  $2.5t GDP

Africa is a continent on the rise. According to African Development Bank’s African Economic Outlook 2015, the African economy grew at 3.9% in 2014, as compared to 3.5% in the preceding year.

Africa’s GDP stood at $ 2.5 trillion in 2014, as compared to $2.4 trillion in the preceding year. Africa’s GDP is mainly dominated by oil exporting economies. Nigeria, South Africa, Egypt, Algeria, and Angola are the largest economies in the region, together accounting for 77.1% of the region’s economy.

  China Way Ahead

The outcome of the ongoing summit will be judged by converting the promises that are likely to be made on both sides into action in a continent where China’s footprint is all over. China has been wooing Africa for the last 15 years or so. It has been pouring billions of dollars into ports, rail tracks, football stadiums, highways, dams and other major infrastructure projects.

China is Africa’s largest trading partner doing an annual trade of roughly $200 billion, though the figures keep changing according to price of commodities. Much of the trade is related to getting Africa’s oil and minerals shipped to mainland China to fuel its insatiable hunger. With the slowing down of the Chinese economy there is anxiety among some in Africa.

India is also wooing mineral-rich Africa for the same reasons as China. As India’s economy takes off again, the need for natural resources will steadily mount. Already India is buying oil from Nigeria, Algeria, Mozambique and Angola. ONGC Videsh is now looking to invest in West Africa. India realizes it cannot compete with China’s cheque book diplomacy. Nor is it trying to do so.

Instead India has been concentrating on institution building, on education, telemedicine and skill development projects. None of this is spectacular, but touches the lives of ordinary Africans.