INDIA TRADE WITH AFRICA

Abstract:
Indias relations with Africa are embedded in their shared history, and cultural exchanges and trade between the two continents dates back to the 14th century. India initiated economic liberalisation reforms in 1991 and as a result, Indias foreign policy moved away from being driven by ideological principles to becoming increasingly pragmatic. Several bilateral and multilateral initiatives have been used to create closer economic links between India and Africa. The dramatic increase in recent years of trade and foreign direct investment (FDI) in sub-Saharan Africa by firms from Asia notably China and India has become an emotionally charged issue. This report gives you some information about the trade relation between India and Africa (continent) and some of the countries in it.

Introduction:
India has been actively promoting trade with Africa in recent years. To boost the countrys trade with the Sub-Saharan African region, the Government of India launched the Focus: Africa program under the EXIM Policy 2002-07. The Government of India provides financial assistance to various trade promotion organizations, export promotion councils and apex chambers in the form of Market Development Assistance under the Focus: Africa program India's potential exports to these countries include machinery and transport equipment, petroleum products, paper and wood products, textiles, iron and steel, plastic and linoleum products, rubber manufactured products, agro products, chemicals and pharmaceutical products. These countries can also be important sources for import of petroleum, metallurgical goods, raw cotton, fruit, vegetables and preparations, chemicals, non-metallic mineral manufactures precious stones, textile yarn, gold, nickel, and ferro-alloys. Further, these countries offer potential for investment in sectors such as tourism, pharmaceuticals, electronics, computer software and accessories, information technology related products, financial services and textiles. Since in East Africa there is lack of experienced manpower to cultivate the land, Andhra Pradesh officials spotted a good opportunity to export its skilled manpower. Authorities in East Africa signed the agreements to give land on a 99-year-old lease to a farmers co-operative society from Andhra Pradesh. Land in Uganda is being given for $3.75 dollars per acre while the government is still negotiating the price for Kenya. In an effort to boost trade ties with Africa, India is planning to provide duty-free access to products from the least developed countries of Africa. As a further measure to boost bi-lateral trade with

African countries India also hosted its first summit with the African Union in April 2008 to put its traditional ties with the continent on a fast track The Indian government has also opened a business centre in Durban to help cut the red tape in deals between the two nations. With more Indian businessmen looking to establish their business in South Africa, a high-powered delegation headed by India's wealthiest man, industrialist Ratan Tata, visited the country recently. Already Tata Motors and, Indian car giant Mahindra & Mahindra, have made inroads into the South African motor industry with the recent launch of new vehicles. Tata Africa Holdings, a subsidiary of the Tata Group, is vying for a controlling stake in South Africa's second telephone network operator worth more than Rands 4 billion. Total bilateral trade between India and South Africa is approaching Rand 6.5 billion, with imports from India at Rand 3.12 billion and exports to India at Rand 3.35 billion. Indian investment in South Africa is estimated at $100 million. India's trade with African countries has doubled from $5,493 million in 2001-02 to $11,822 million in 2005-06. Bilateral trade has further shot up to $18,538 million during April 2006-January 2007. Indias main reason for venturing into this region is oil and natural resources. From its relationships with the Eastern African region and South Africa, India has been able to maintain a steady trade of resources such as oil, gold and other minerals. For example, India has oil stakes in Angola and Nigeria, and retrieves its gold mostly from South Africa. Indias FDI (Foreign Direct Investment) to Africa is about $2.6 billion. From 2002-2004, Africas average exports totaled $3.027 billion whereas its average amount of imports was $3.267 billion. Compared to China, however, Indias attempts to push forth further contracts and partnerships. Indias recent re-engagement with Africa has been fuelled by pragmatic concerns - namely to expand economic interdependence and to meet resource needs. Bilateral trade between India and Africa has increased from US$ 967 million in 1991 to US$ 25 billion in 2006-2007, and then further, to US$ 40 billion in 2008-2009. Moreover, India wants to increase the total trade amount between Africa and itself to US$ 70 billion by 2015. Meanwhile, Indias official investment totals US$ 2 billion, in addition to the US$ 5 billion from private sector investment. Economic cooperation between these two actors spans several sectors, including agriculture, small and medium enterprises, health, education, information technology and communications, automobiles, manufacturing and railways. Several bilateral and multilateral initiatives have been used to create closer economic links between India and Africa. In March 2008, India hosted the fourth India-Africa Project Partnership in New Delhi, which was attended by more than 500 business delegates from 33 African countries. Approximately 150 projects worth US$ 11 billion were discussed, while the Export-Import (EXIM) Bank of India also extended US$ 30 million in credit to finance Indian exports to African countries.

Bilateral between India and Kenya trade grew at 28% in 2008 and was over US$ 1.5 billion in 2009-10. Today India is Kenyas sixth largest trading partner. Main Indian exports to Kenya include pharmaceuticals, steel products, machinery, yarn, vehicles and power transmission equipment. Main Kenyan exports to India include soda ash, vegetables, tea, leather and metal including scrap. During 1990-2004, Indias import from Africa has risen at an annual average growth rate of 14% Between 1997 and 2005, it got doubled. It was predominantly mineral fuel/lubricants (55.1%) in 1997 but by 2005, Gold became very prominent as it accounted for two-fifth of total imports. However, it is notable that during 1997-2005, the import volume for commodities got more than twelve-fold increase; machinery and transport equipment sector has had a seven-fold increase, while the import volume of mineral fuel/lubricants reduced to its one-fifth. It is evident that Indias import composition has changed dramatically over the last decade. Growing economy and everenlarging gold consuming class has dictated the import structure. South Africa, the largest gold producer, accounted for 68 % of Indias total import from Africa in 2004. Indias export to Africa had 182 % increment from 0.95 billion dollar in 1997 to 2.7 billion dollar in 2005. Manufacturing goods (40 %) is not a predominant sector in 2005 as it was in 1997; it is more diversified into chemical products, machinery/ transport equipment, food and livestock etc. Unlike import situation in the same period, every single sector has observed positive growth; however their trade-deficit has kept looming. At the India-Africa Forum summit held in India in 2008, the government announced credit lines of about $5.4 billion by 2012 to African countries. It has so far extended $1 billion in lines of credit and will give an additional $500 million to these nations. India and South African nations are expected to sign a trade agreement by the middle of this year that aims to reduce tariffs on certain item. India's export to South Africa comprises mineral fuels, automobiles, iron, steel, chemicals, pharmaceuticals, cotton yarn and fabrics. India and South Africa has also revised their trade target of $10 billion (which was earlier scheduled to be achieved by 2012) to $15 billion, as the earlier target is likely to be achieved by this fiscal-end. During April-September 2010-11, the bilateral trade stood at $5.3 billion compared to $3.7 billion in the same period last fiscal. (Source: Business standards - Mon, 2011-01-17)

India Africa Trade (Value in Millions)

Year Exports** Imports Total Trade

2005 - 2006 6,993.53 2006 - 2007 10,263.96 2007 - 2008* 14,196.09 2007 - 2008(April 07 - Feb 08)* 12,716.42 2008 - 2009 (April 07 - Feb 08)* 12,857.06 Source: india.gov.in/sectors/commerce/india_trade

4,878.56 17,726.67 20,497.65 18,789.23 22.853.51

11,872.09 24,990.63 34,693.74 31,505.65 35,710.57

India Trade with some of the African countries South Africa:

India's aggressive policy of liberalization coupled with strong economic growth has been attracting foreign investors across the globe. India is now aiming at strengthening its relations with non-traditional partners, and one amongst them is South Africa. Trade between South Africa and India has been growing at about 30% per annum in the recent years. The projections are that bilateral trade will quadruple in the next four years, reaching more than Rs 100 billion by 2011. (Source: articles.economictimes.indiatimes.com) 'The two countries are now working to achieve a higher trade target. The two countries agreed for an early finalization of Preferential Trade Agreement between India and the Southern Africa Customs Union (SACU). In 2008-09, the bilateral trade between India and South Africa touched $7.41 billion during 200809. Having said that, it is imperative to state it was South Africa that gained immensely from this two-way trade. While South Africa exports to India phenomenally rose to $5.44 million, while Indias exports to South Africa was a mere $1.97 billion. Major South Africa Exports to India include: Oil (Not Crude) From Petrol & Bitum Mineral Etc. Motor Cars & Vehicles, Rice, Iron & Steel and Auto components. Major South Africa Imports from India include: Iron & Steel, Diphosphorus Pentaoxide; Phosphoric Acid Etc, Coal; Briquettes, Ovoids, Coal, Copper Ores and Concentrates, Ferrous Waste & Scrap; Remelt Scr Iron/Steel, Ingot.

Egypt: Egypt has traditionally been one of India's most important trading partners in the African
continent. The India-Egypt Bilateral Trade Agreement has been in operation since March 1978 and is based on the Most Favored Nation clause. Bilateral trade has grown significantly in past five years. The year 2002 was considered as year of India in Egypt by the Egyptian ministry of foreign trade for further enhancing the bilateral relationship.

According to the department of commerce and Industry in India, Indian exports to Egypt have touched $ 423.68 million in 2004 which is up by 15.29% and the imports from Egypt have reached $ 137.27 million in the same year which is up by 39.77%. India is the twelfth largest investor in Egypt and it is predicted that in the end of the year 2005, the total investment of India in Egypt will cross $ 450 million in 43 business ventures. The main exportable items from India were Iron and steel, Jute yarn, Plastic and rubber, Chemicals and engineering goods. The important sectors where the cooperation has increased are Information technology, Pharmaceuticals, chemicals, Fertilizers, Steel, Energy and agricultural equipments.

Algeria: India has signed double taxation avoidance agreement in January 2001 to avoid double
taxation and prevent fiscal evasion with respect to taxes on income and on capital with a view to promote economic cooperation between the countries. It is yet to be ratified by the Algerian side. Agreement on cooperation in Small and Medium-scale Enterprises signed in October 2003. Bilateral trade is showing a positive trend; it had grown from US$ 55 million in 2001 to US$ 2.2 billion in 2010. Bilateral trade figures for the last seven years are given below:
2002 2010 83.00 805.00 2004 2005 2006 2007 2008 2009

Indian export s Algeri an export s

219.00 763.75

288.68

422.00

444.00

755.00

67.00 37.41 1443.74

140.00

651.00

1550.00

1287.00

265.00

Total

150.00 256.41 428.68 2207.49

1073.00

1994.00

2042.00

1070.00

Ghana: Ghana as part of India's 'Focus Africa' policy to explore new markets in the African
continent, is leading a CII-industry delegation here covering oil and gas, energy, pharmaceutical, fertilizer, electrical equipment, banking and consultancy. One key area emphasized was Indias Partnership with Ghana in the fertilizer, petroleum and gas sector on the back of the recent oil and gas found in Ghana. A MoU has already been signed for this between both countries. Other areas

discussed were the availability of land, potable water and infrastructure development for the project. Both sides specifically identified cooperation in pharmaceuticals, information technology and energy sector as their key priorities. India, as one of the world's biggest economies, buys diamonds, gold, cocoa, and other primary products from Ghana. Imports from India to Ghana increased to $314,491,460 at the end of 2009 from $307,534,508 in 2008. Ghana's exports to India have fluctuated between the lowest figure of $6.85 million in 2001 and the highest figure of $204.4 million in 2008.

Mauritius:

India and Mauritius have historical ties, common culture and values. At a time when economic slowdown has made most developed/developing markets an unattractive proposition, Mauritius offers plethora of foreign trade opportunities for Indian businesses. It was noted that though Indian investments in Mauritius had been increasing in the recent past, these continued to be well below the potential. Mauritius pointed out that it could serve as a hub for Indian investors not only for the Mauritius market but also for other markets in view of its various trade agreements and core competencies, strategic location and trade agreements at multilateral and regional levels. (Source: articles.economictimes.indiatimes.com). A Preferential Trade Agreement (PTA) between Mauritius and India has been finalized. The PTA will provide, among others, for the Indian authorities to grant duty free access on about 30 products including pasta, biscuits, handbags, wood marquetry, napkins, sanitary towels, paper articles, synthetic semi- precious stones, soap and metals. The Agreement also makes provision for duty concessions on about 35 products ranging from smoked fish, leather articles, sunglasses and spectacles to thermometers, electronic clocks, brush and fresh cut flowers. (Source: Government Information Service, Prime Ministers Office, Level 6, New Government Centre, Port Louis, Mauritius. Email: infserv@intnet.mu)

Conclusion:
Considering the growth and development of India trade with Africa in the past and current years, we can understand that there is steady increase in the trade relations between these two nations. The Import and Export rate also increasing as consistent growth from 2005 to 2009 as shown in the table. The primary factor contributing the growth of trade between these two nations is the trade agreements and policies adopted by the nations. We can also see some of the major private industries have established there companies in Africa providing employment to people. We can also see the individual trade relations between India and some of the African nations.

References:

http://www.africa-business.com/features/botswana_business.html

http://india.gov.in/sectors/commerce/india_trade.php?pg=2 http://www.business-standard.com/india/news www.civilservicestimes.com/component/content

http://www.economywatch.com/world http://www.africaonline.com.gh/, http://www.gipc.org.gh/ //commerce.nic.in/trade/international_tpp_africa_13_ghana.asp