The economic partnership between India and the countries of Latin America and the Caribbean (LAC) holds great promise for all involved. These two economies complement each other effectively, offering a wealth of strategic resources that can nurture robust commercial and investment ties for mutual benefit.
A Multifaceted Partnership on the Global Stage
The dynamic partnership between India and the LAC region has evolved into a multifaceted collaboration encompassing trade, investments, industry collaborations, and cultural exchange. It has emerged as a significant strategic force on the global stage. Shared economic interests have paved the way for a comprehensive alliance with a focus on four key areas of cooperation: diversification of supply chains, resource partnerships, exchange of developmental experiences, and joint efforts to address global challenges.
Trade Relations Between India and LAC
In terms of trade, India relies significantly on imports from various key regions, including North-East Asia, West Asia-GCC, ASEAN, and EU countries. Latin America plays a noteworthy role in India’s trade landscape, ranking as the country’s eighth-largest import source and contributing approximately 3% of India’s total imports.
Conversely, the majority of imports in LAC come from North America, North-East Asia, and Europe. India accounts for about 2% of LAC’s total imports, making it the ninth-largest exporter to LAC.
In trade terms:
- LAC represents roughly 3% of India’s total imports and ranks eighth among India’s import sources.
- Similarly, India accounts for 2% of LAC’s total imports and ranks ninth among LAC’s exporting partners.
- In 2022, the total trade between these two regions reached approximately US$49 billion. This impressive figure is largely attributable to India’s trade with only a handful of countries in the LAC region, such as Brazil (30% imports, 56% exports), Colombia (12% imports, 8% exports), and Argentina (18% imports, 5% exports).
Top LAC Exports to India
India largely imports extractive and agricultural products from LAC. Four product groups namely, crude and petroleumproducts, pearls and precious stones/metals, vegetable oils, and ores accounted for nearly 86% of India’s total imports from LAC in 2022.
- Crude oil imports from Venezuela, Mexico, and Brazil, accounted for 30% of India’s total import from LAC.
- Precious metals, representing 25% of total imports of India from LAC, are mostly sourced from Chile, Peru, and Brazil. Soybean oil and vegetable oil (22%) are shipped mostly by Argentina and Brazil. Industrial manufactures (machinery and mechanical appliances etc., iron and steel, electrical machinery, organic chemicals and sugars and sugar confectionery) add only 5% to the value of imports to India from LAC.
- For several LAC countries, exports to India are often restricted to just one dominant item.
Top Imports of LAC from India
India predominantly exports manufactured commodities to LAC nations, including motor vehicles, chemical products, and organic chemicals, followed by extractive products such as mineral fuels, mineral oils, aluminum, iron, and steel, among others. In 2022, manufactured and extractive commodities together accounted for nearly 78% of India’s total exports to LAC.
Way Forward
To create a robust trade landscape benefiting both economies, it is crucial to focus on strong economic cooperation, balanced trade relationships, and sustainable development. Opportunities for both regions to explore include:
Establishing a Ministerial Council on Trade and Strategic Technologies: Both regions can address sustainability, national security, and cybersecurity concerns by forming a high-level platform. Specific ministerial meetings can be organized to discuss key areas like green energy, sustainable value chains, and digital connectivity.
Diversifying the Trade Basket: Currently, LAC exports to India mainly consist of natural resources such as oils and precious metals, while India primarily exports automotive goods and medical devices. To achieve a more balanced trade relationship and promote sustainability, both regions should strengthen cooperation in sectors like infrastructure, information technology, manufacturing, and agriculture.
Streamlining Trade Facilitation: Simplifying customs procedures and reducing trade barriers, both tariff and non-tariff, is crucial for enhancing economic activity between India and the LAC. This can be achieved by improving regulations, enhancing connectivity, and promoting digital platforms for trade.
Encouraging Investments: Encouraging Indian companies to invest in LAC and vice versa is vital for economic growth. Governments should create a favorable investment climate by offering tax incentives, protecting intellectual property rights, and ensuring political stability. Public-private partnerships can also leverage resources and expertise for joint projects. India, with its attractive manufacturing incentive schemes, is currently an appealing destination for investment.
Building Capacity and Developing Skills: The LAC countries can benefit from India’s experience in IT, healthcare, education, and road connectivity. Collaboration can involve training programs, vocational exchanges, and knowledge-sharing activities to enhance talent and skills in their respective economies.
Finally, it must be noted that forging a strong partnership between India and LAC not only benefits the economies of LAC and India but also paves the way for a more interconnected and resilient global trade landscape.
This blog is based on the CII publication titled ‘India-LAC: furthering economic partnerships for shared and sustained growth’.