The continent of opportunity for India

The continent of opportunity for India
The continent of opportunity for India

India-Africa trade jumped from just $1 billion in 2001 to $71.4 billion in 2014-15. It is one of the success stories for Indian industry in developing and expanding an emerging market and highlights the benefits of South-South cooperation. Africa continues to be the continent of opportunity at a time when global growth is seen as volatile. Some of the world's fastest growing economies are present in Africa, and its expanding middle-class of consumers and young workforce are attractive for global businesses. It is estimated that Africa's middle-class consumers could cross 500 million by 2030 and their rising demand could add over $1 trillion to its GDP by 2019. Africa is a resource-rich geography, and prudent macroeconomic management across many countries has helped leverage the commodity boom of past years. All these factors encourage Indian companies to seek new horizons in the African continent. Interestingly, India-Africa trade has not been a one-way street and is reasonably well balanced. While Indian exports to Africa stood at $25 billion in 2015-16, its imports from the continent came in at $32 billion. India depends significantly on crude oil imports from Africa to fuel its own growth, and works with African nations to meet their demand for automotives, pharma and petroleum products, among others. Simultaneously, investments from India in Africa have surged to an estimated $54.5 billion between 2003 and 2014. Indian companies have evinced strong interest in sectors of telecommunications, IT, energy and automobiles, in both greenfield and mergers and acquisitions modes. This compares with China's investments into Africa which are estimated to have gone up from $7 billion in 2008 to $26 billion in 2013. China has recently announced a loan and aid package for Africa of about $60 billion. While resource acquisitions are one aspect of the India-Africa relationship, the engagement has tended to be multi-dimensional in nature, encompassing both traditional and emerging areas. Manufacturing competitiveness, innovation and R&D, project and infrastructure development, and food and energy security are some of the fields of mutual interaction. India has also focused on human capital development, engaging in skill development and healthcare sectors, among others. As governments of both sides have proactively taken up new areas of economic cooperation, a notable trend is the growing engagement of the private sectors. The forthcoming visits of President Pranab Mukherjee and Prime Minister Narendra Modi are expected to take further the political and economic ties between the two regions. Indian private sector companies consider the African markets as a significant opportunity and the continent forms a key part of their outward growth strategies. The Indian companies have also been keen to utilize the Lines of Credit offered by the EXIM Bank of India which earmarks about 60 per cent of its total LOCs for projects in Africa. This effort can be further expanded and the conversion rate of commitments to actual disbursement needs to be increased to deliver sustainable outcomes. India can carve a significant niche in the African economy through its Duty-Free Tariff Preference scheme which offers duty-free access to African products in the Indian markets. Under the scheme, least-developed African nations can export to India products of all tariff lines, except 211, representing more than 98 per cent of India's total tariff lines. Indian companies could consider investing in manufacturing facilities in these nations, tapping local resources and adding value to address Indian markets. Indian companies can also distinguish themselves through enhanced engagement in social development and human capacity building, as many of them are already doing. Working with local communities and employing local workers can help build their brand in African nations and make their operations more sustainable for a long term impact. We in CII believe that Africa is an excellent opportunity for Indian industry which could address $150 billion worth of potential in the continent up to 2025. CII has been actively engaging with Africa through its CII-EXIM Bank Conclave on India-Africa Project Partnership, the 11th edition of which was held in March this year and we would continue to lead Indian interaction with our friends in Africa. Chandrajit Banerjee is Director-General of the Confederation of Indian Industry.

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