India wants to boost trade with the African continent

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: Underlining its “distinct” approach towards Africa, the government at the first-ever summit with African countries has announced a Duty Free Tariff Preference Scheme for Least Developed Countries (LDCs) to further boost both trade as well economic relations between the two.

Under this scheme, India shall unilaterally provide preferential market access for exports from all 50 least developed countries, 34 of which are in Africa, Prime Minister Manmohan Singh said at the inauguration of the first India-Africa summit. The scheme will cover 94% of India’s total tariff lines. Specifically, it will provide preferential market access on tariff lines that comprise 92.5% of global exports of all LDCs.

Products of immediate interest to Africa that are covered include cotton, cocoa, aluminium ores, copper ores, cashew nuts, cane sugar, ready-made garments, fish fillets and non-industrial diamonds.

Senior officials in the external affairs ministry made it clear that the engagement with the African continent was not to counter the growing Chinese presence in that region.

The two-day summit is part of India’s concerted effort to increase its imprint on the continent, in view of the stiff competition from China flexing its economic muscle to tap Africa’s considerable resources in energy and minerals.

Heads of states of 14 African nations, who have been chosen by the 54-nation African Union, were present where Singh reiterated India’s commitment to peace, stability and socio-economic development in Africa and for it to play an ever-growing role in international relations is steadfast.

“India is helping Africa develop its own infrastructure and in value addition of its resources. India believes in the philosophy of jointly developing resources to the mutual benefit of both India and Africa,” external affairs ministry officials stressed. While bilateral trade between India and Africa is growing and is estimated to be around $30 billion, it is still half of the China-Africa trade. China’s presence in the hydrocarbon sector in Africa far surpasses that of India.

India-Africa trade stood at $967 million in 1991. By 2006-07, India’s exports to Africa stood at $8.4 billion, while imports aggregated $11.4 billion, having almost doubled since the previous year.

In a survey carried out by Ficci ‘Strengthening Economic Engagement between India and Africa’, it has said that India could double the volume of its bilateral trade with Africa to $50 billion in 2012 by announcing incentives for exports and discussing improvement in business environment with African countries. “Given such optimism in trade with African nations, it is felt that doubling of trade to Africa to $50 billion by 2012 is a distinct possibility,” the study points out.

According to the survey, Indian companies felt that the Indian government should adopt more pro-active measures to encourage trade, like entering into preferential trade agreements with individual countries and regional economic communities and enhancing the lines of credit to African countries. They called for a special package to push Indian exports into Africa.

A public-private partnership initiative to create “Africa Promotion Council” was recommended, which could have sub-councils focusing on each of the five regions in the African continent.

The Indian companies called attention to barriers encountered in fully reaching the potential of trade with Africa—from prohibitive costs of shipping, shortage of shipping line, high transaction costs and delay in obtaining visas. “Brand India is still in infancy in many of the African countries. There is a need to promote products from India to the African countries. This is particularly important if we are to add more and new products to our export basket,” said the survey report.

Wary of expensive western technologies that need to be modified to suit African conditions, India has emerged as a favourite destination for its low-cost high value technologies aimed at value-addition of natural resources in the continent.

Recently India has initiated several measures through which technology is being made available to several other developing countries. For instance, on the one hand India is helping providing space research technologies through Indian Space Research Organisation (ISRO) and at the same time is setting up a demonstration centre for small and micro-machineries in Ivory Coast.

Both have also agreed to co-operate closely to ensure quick and effective implementation and rollout of the Pan-African E-network project being funded by India.

Africans have identified an array of sectors like textile or garment industry, agriculture and food processing, information and communication technology (ICT), the gems and jewellery industry, small and medium industry, and infrastructure as areas in which Indian technologies can make a world of difference.

According to Dr Sachin Chaturvedi, fellow, Research and Information System for Developing Countries, “The trade linkages of India with Africa started taking off during comprehensive economic reforms in the late 1990s. India’s trade with Africa has more than doubled between 2001 and 2007, from $5,493 million in 2001-02 to $12.24 billion in 2006-07.”

Though India’s exports to Africa have grown over the last two decades, African exports to India have not picked up, though the import growth rate of India from developing countries is higher than that of developed countries during the same period. This asymmetry in bilateral flow of trade between India and Africa needs to be corrected by taking the experiences from the past particularly from India’s engagement with South African trade, Chaturvedi points out.

Over the past five years, India has extended credit worth $2 billion to African countries, of which more than half has already been taken up. Its economic links are moving beyond its traditional Indian Ocean and Commonwealth partners. Investment in Côte d’Ivoire, for example, is expected to grow to $1 billion by 2011, which represents 10% of all Indian foreign investments over the past decade.

Also, in the last few years, India has acquired considerable experience in undertaking projects in different countries in Africa through extension of concessional lines of credit by the Exim Bank of India.

So far, between 2003-04 and 2008-09, India has extended lines of credit amounting to $2.15 billion. Over the next five years, the amount will more than double. The government has also offered additional lines of credit amounting to $5.4 billion, both bilaterally and to the regional economic communities of Africa.

Developing infrastructure in the areas of railways, IT, telecom and power generation and physical connectivity in Africa would be priority. “We will promote activities of small, medium and micro enterprises. In this task, we will reach out to the private sector and make full use of public-private partnership,” Singh told the African leaders here.

Sino-African trade now stands at $55 billion. India’s concern about Chinese expansion is very real and most visible in the African-Indian Ocean rim, with deepening ties such as defence agreements with Mozambique and the Seychelles.

The distribution of India’s imports in different sectors from the rest of the world and Africa indicate that overall imports are expanding at the rate of 16.7% per annum between 1997-08 and 2006-07, and variations in sectoral growth during the same period range between 31.7 % and 2.95 % per annum.