The growing India-Africa partnership assumes critical significance in an increasingly interconnected, inter-dependent world. The partnership is unique in many ways. It represents the hopes and aspirations of over 2 billion people who live in the two regions. Hence, every dimension of the partnership is underpinned by significant developmental initiatives.
This partnership is a stellar example of multipronged South-South Cooperation. Over the last two decades, this bilateral partnership has grown manifold and now extends to multiple areas. Manufacturing competitiveness, innovation & R&D, infrastructure development, food and energy security, environmental safeguards, and human capital formation are some of the areas of progress over this period. It is more a developmental partnership rather than simply a commercial engagement. The private sectors of both sides have been actively involved in bilateral projects and other development work in Africa.
As global value chains shift and both economies expand in the post-Covid world, a closer relationship between Africa and India is inevitable and we have much potential ahead of us.
India-Africa bilateral trade volumes grew from just $1 billion in 2001 to $66.6 billion in 2019-20. Indian and African governments have systematically dismantled various tariff and non-tariff barriers to encourage trade. Importantly, the private sectors in both regions have been at the helm of various trade promotion and facilitation initiatives.
The African Continental Free Trade Area (AfCFTA) has now come into effect. In the pandemic period, this vast regional market will help African countries accelerate growth and attract FDI.
Indian industry believes that India could play a defining role in supporting Africa’s economic integration with deeper engagements in the region’s industrial and infrastructure development projects, public institution building, development of human resources for future industries, etc. As a time-tested partner of Africa, India could also play an instrumental role in creating the avenues for deeper intraregional business, trade and investment flows.
While the two-way trade and investment ties have deepened, the future potential is much higher. With the changing architecture of global trade agreements, the focus is shifting towards creating value-chain and investment led trade. The Indian private sector can leverage available institutional mechanisms to further deepen its trade and economic footprint in African nations.
An investment-led trade approach could help sustain the dynamic trade growth between India and Africa, help extend trade both in terms of the number of partners involved as well as the range of goods and services traded. Investments for joint ventures between the countries would best open up the route for enhancing goods trade.
In addition, a key mechanism by which African countries could utilise to step up their exports to India is through the effective utilisation of India’s DFTP (Duty-Free Tariff Preference) scheme, the genesis of which goes back to the first India-Africa Forum Summit in 2008. DFTP is a unilateral duty-free market access scheme, which India has provided to all least developed countries, including 34 in Africa. Since it came into force in August 2008, only a few African LDCs have managed to increase their exports to India, notably Tanzania.
Contrary to similar schemes provided by some other developing countries, the DFTP programme offers much deeper market access into India. After the amendment of the DFTP scheme in April 2014, its coverage has gone beyond 98 per cent of India’s total tariff lines.
The second important instrument is the EXIM Bank / Government of India’s Lines of Credit (LoC). Undoubtedly, LOCs have helped Indian companies enter the African market as well as expand their footprint in the continent. This is evident from the fact that LOCs to African countries constitute 60 per cent of all LOCs. However, there is still a gap between LOC commitments and actual disbursement, which needs to be bridged.
The article written by Mr Noel Tata, Chairman, CII Africa Committee and Managing Director, Tata International Ltd, appeared in the October 2020 issue of CII Policy Watch. Click here to read the full issue.