<div>Most of us don’t realise it, but India is becoming increasing dependent on African countries. Recent months have seen increasing investment from India into African countries. Bilateral trade has risen sharply. And now the interdependence is at its highest level in history. </div><div> </div><div>Between 2001 and 2011, bilateral trade rose $10 billion to $63 billion. This was same as India’s trade with US at $63 billion. But the next three years will overshadow all previous growth. A study by Confederation of Indian Industry and the World Trade Organisation estimates that bilateral trade will balloon to $176 billion in the next three years. </div><div> </div><div>The surprising element here is that India now depends on African countries for 20 per cent of its petroleum imports. Just six years ago in 2005, India did not import any oil from African countries. Today the top importers from Africa to India are Nigeria, South Africa, Angola, Egypt, Algeria and Morocco. These countries export mostly oil and gold to India. </div><div> </div><div>This is a significant shift in the bilateral relationship which is benefitting both regions. For India it is important to reduce dependence on middle east for oil and for the African countries it was important to find more buyers to get the best price for their products. This growing dependence on Africa will be a key dynamic that will shape trade and investment with India. </div><div> </div><div>It is not just natural resources. There is a growing shift towards services and manufactured products. Indian tourists to Africa doubled. There was an increase of close to 50 per cent from African countries to India. While absolute numbers are growing, new opportunities in travel and hospitality are being tapped. </div><div> </div><div>Inorganic chemicals and pharmaceutical made in countries like Egypt, Morocco and South Africa are signs of rising imports of technology intensive imports to India. </div><div> </div><div>Efforts are on to invest in food processing industry in Africa by Indian companies so that the products can be imported back to India. </div><div> </div><div>Indian companies have invested about $32 billion in various projects in Africa. Now a reverse flow is emerging. Companies from Morocco and South Africa are leading the investment into India. These include FirstRand Bank and SAB Miller from South Africa to 74 per cent Moroccan joint venture with Paradeep Phosphate. The CII-WTO report says that as outward FDI from Africa grows, it is likely to head towards similar markets like India. </div><div> </div><div>Indian companies are now making clear distinctions between the diversity of regions within Africa. They are creating dedicated strategies for East, West, South, central and North Africa. Each of these regions is a unique market with specific strengths. Companies are increasingly choosing to specialise in a region and are not treating Africa as a single homogenous market. This approach promises to pay greater dividend as even African companies are studying Indian states before making trade decisions. </div><div>The study has highlighted steps that need to be taken to remove hurdles to trade and investment based on a survey of Indian and African business leaders.</div><div> </div><div>Surprisingly, the problems are common. There is lack of market access and adequate knowledge of each other’s markets. Lack of trade finance and bilateral investment treaties is holding back transactions. While large companies have the ability to overcome such hurdles, mid-sized companies are hesitating to invest in the absence of institutional support. High cost of transport and logistics in Africa is a barrier and an opportunity for investment. Governments in both regions have to work harder to make business environment safer and easier. </div><div> </div><div>Africa’s trade with India grew by 48 per cent while with China it grew only 28 per cent between 2005 and 2011. This eye-opening fact should be tempered by mentioning that the Africa’s bilateral trade with China stands at $166 billion, more than double that of trade with India. </div><div> </div><div>But the higher rate of growth is an indication of where the economic relationship can go if the atmosphere is made more conducive. </div><div> </div><div>Removal of fundamental hurdles will ensure that Indian and African countries develop deeper and balanced ties that will be healthy and sustainable. </div><div> </div><div>(<em>Pranjal Sharma is a senior business writer. He can be contacted at pranjalx@gmail.com</em>) </div><div> </div>
