At a time when global trade is facing headwinds, India needs to diversify its exports away from markets which are turning increasingly protectionist towards the Global South. After all, it has been forcefully voicing the concerns of developing countries in multilateral fora like the WTO, and most recently ensured the admission of the African Union into the G20. India must therefore walk the talk in boosting its engagement with such countries. In this regard, India’s commerce and industry minister Piyush Goyal urged domestic companies to invest more in Africa and increase trade with countries of the continent with a population of 1.4 billion, which is as large as India’s. The African Union has 55 member countries whose combined GDP is $3 trillion, also not very different from India’s.
There are as many as seven African countries out of the 12 emerging and developing countries that are expected to grow faster than India this year according to the IMF. To be sure, India has invested and has registered a significant uptick in two-way trade with Africa but China has made much deeper inroads into the continent. China’s stock of FDI in Africa amounted to $ 44 billion which is 3-times larger than India’s investments of $14 billion in 2021 according to UNCTAD. China’s trade with Africa is also 3-times larger at $282 billion than India’s $97.8 billion in 2022-23. While India cannot match the dragon’s cheque book diplomacy in making big-ticket investments, the big difference is that its engagement with the continent evokes relatively less resentment.
Looking ahead, India’s investments and trade in Africa are bound to grow manifold if it leverages its long-standing historical links. The biggest advantage India has relative to China is the presence of a 3 million-strong diaspora across 46 countries, especially in south and east Africa with strong linkages to trade. The diaspora’s contribution is critical as they own distribution channels, manufacturing facilities and even mines in Africa. Unfortunately, this potential has not been adequately tapped. India has indeed made diverse investments in telecom, automobiles, pharmaceuticals, apparel, fast-moving consumer goods and tourism besides securing access to Africa’s raw materials and oil. One of the biggest bets was by Bharti Enterprises, when it acquired a Kuwaiti company, Zain, 13 years ago and now has a presence in 14 countries. Reliance Industries and the state-owned Oil and Natural Gas Corporation have made investments in oil and gas. Such resource-seeking investments in Mozambique and Sudan top India’s outbound investments in Africa from April 2000 to March 2023, according to the department of economic affairs in the ministry of finance. However, deep-going reforms are needed for India’s FDI to grow further and trade volumes to increase in tandem. Africa’s business environment needs to be made more investor-friendly and transaction costs lowered. There are also geopolitical risks with the rising incidence of military coups in several countries.
For deepening the Africa connection, the Indian government obviously has a bigger role to play. It has extended concessional loans of $12.37 billion and completed 197 projects. These projects range from drinking water schemes, irrigation, rural solar electrification, power plants and transmission lines to cement, sugar and textile factories, technology parks and railway infrastructure. Stepping up development cooperation is imperative to clear the decks for higher investments and trade volumes as an exemplar of south-south cooperation when global trade tidings are not so encouraging.