Unlocking Opportunities: India-Africa Partnerships and Investment Avenues

08 Jul 2023

Over the years, India-Africa trade has undergone significant shifts, driven by overarching trade goals and changing dynamics. From 2000 to 2010, trade relations experienced remarkable growth, with increased trade volumes and the inclusion of sectors like oil and gas, machinery, and automobiles.

India and Africa have prioritised key sectors to boost bilateral trade and address common challenges. In the food and agriculture sector, both regions focus on food security, promoting agricultural technology and trade. Energy security is achieved through collaborations in the oil and gas sector, with Indian investments in African oil fields. Mining and minerals attract Indian investments, creating value in Africa.

Expanding Trade Relations

As per latest data from the Ministry of Commerce and Industry, Government of India, bilateral trade between India and Africa stood at approximately $98 billion in 2022-23, a significant increase from $7 billion in 2001.

Indian companies have shown keen interest in investing across various sectors in Africa, including infrastructure, energy, agriculture, healthcare, and information technology. Investment opportunities in Africa have been primarily driven by the continent’s emerging middle class, rising consumer demand, and improving business environment. India is providing significant development cooperation to Africa. This includes providing financial assistance, technical assistance, and capacity building.

Key Sectors: Boosting Bilateral Trade

India and Africa share a significant bilateral trade relationship across various key sectors that play a vital role in shaping trade ties between the two regions. 

Agriculture and Allied Sectors: Prospects for collaboration in this segment remain promising as both regions continue to invest in agricultural development, technology transfer, and market linkages, the trade is expected to flourish, creating new opportunities for farmers, agribusinesses, and consumers in both India and Africa.

Minerals and Mining Sector: India has been a significant importer of minerals from Africa, while African countries have relied on India’s expertise in mining technology and investment. The total trade in the mining and mineral sector between India and Africa since 2001 stands at US$ 43.13 billion, with an export-import proportion of 22.7% and 77.3%, making India a net importer in this sector.

Drugs & Pharmaceuticals: The consistent growth in trade reflects the increasing demand for medicines and healthcare products in Africa, as well as India’s capacity to cater to these needs. In the year 2020-21, the trade volume soared to an all-time high of US$ 3.8 billion. Analysing trade composition makes it evident that medicaments, including pharmaceutical products for both retail and non-retail sale, constitute the largest share, accounting for 85.34%.

Manufacturing: Trade between India and Africa in the manufacturing sector has witnessed substantial growth strengthening economic ties between the two regions. India has been a net importer in this segment, reflecting the demand for various manufactured goods in the Indian market. This creates avenues for African countries to tap into India’s growing market by supplying goods that cater to India’s specific requirements and preferences.

Sustainability & Green Energy: Green energy and renewable energy have become central themes in the India-Africa bilateral trade. India, with its robust renewable energy sector, including solar, wind, and hydroelectric power, has the capacity to support Africa’s transition to green and sustainable energy sources.

Electrical Machinery and Equipment: This segment consists of two main components, each contributing to the bilateral trade dynamics. Nuclear reactors, boilers, machinery, and mechanical appliances, along with their parts, represents 60% of the total in this segment. Electrical machinery and equipment, including their parts, constitute the remaining 40% of the trade. This reflects the increasing demand for modernizing electrical infrastructure and supporting various industries in Africa.

Transportation: Key components India-Africa transportation sector trade includes railway or tramway locomotives, rolling stock, and parts thereof, railway or tramway track fixtures and fittings and parts thereof, mechanical components, vehicles other than railway or tramway rolling stock and parts and accessories thereof, aircraft, spacecraft, and parts thereof, and ships, boats, and floating structures. Each component plays a crucial role in shaping the trade patterns and facilitating the exchange of goods between India and Africa.

Improving Environment Facilitating Trade and Investment

The African Continental Free Trade Agreement (AfCFTA), which came into effect in January 2021, holds immense potential for both India and Africa. India is poised to play a guiding role in the strengthening of AfCFTA through renewable energy and transformative green industrialization, agriculture, food and nutrition security. Additionally, India would be able to assist in strengthening finance institutions, participating in multilateral forums, and contributing to a global green new deal that enhances the effectiveness of AfCFTA.

The AfCFTA presents a substantial opportunity for Indian companies to expand their market reach and diversify their investment portfolios in Africa. Indian businesses can capitalize on the preferential access to the African market and participate in regional value chains, unlocking immense growth potential.

The Future of Bilateral Partnership

The potential between the two regions of Africa and India is immense. India has greatly stepped up its cooperation and commitment to the African continent. Under the G20 India agenda, the Business Engagement Group of B20 India has set up a special Action Council which has been deliberating on many of the areas where the businesses of G20 nations can support African integration and development.

This article is derived from a report by CII Centre for International Research, titled “India-Africa Trade”.