Prime Minister Narendra Modi is on a five-day tour of Africa, when he is visiting Mozambique, South Africa, Tanzania and Kenya. This is Modi's first official visit to continental Africa. He had earlier visited the island nations of Mauritius and Seychelles.
The prime minister's tour comes at a very opportune time. For one, India is looking for resources to feed its growth, while Africa has huge untapped potential.
"What Modi is doing now holds huge importance," Rishi Shah, economist, Deloitte India. "He is marketing India's abilities and the gains may not come immediately. It may take five years or even 10 years. India needs more markets to grow and Africa is one such, where the country can export its goods and services," Shah said.
It is to be noted that India's trade with Africa has been growing leaps and bounds from 2008. According to IMF, India's exports to Africa increased 100 percent during 2008-2013 and imports 80 percent. Notably, India has overtaken the US in African markets. Over the last, India's exports to Africa rose 14 times to $70 billion. The country has also disbursed $3.5 billion credit on concessional rate, which has supported 137 projects in 41 countries.
Viewed in this context, there are three reasons why Modi's tour is important for India:
1) Alternative to China: China has a huge presence in the continent. The country's total trade with the continent stood around $166 billion in 2013. But there have been problems. For example, take Nigeria, a country where China is the largest source of FDI ($1.79 billion in 2015). The Nigerians are not happy with the sloppy working conditions at Chinese companies and low quality of products imported. On the whole, as China aggressively expanded its presence in the continent, the people there started viewing the country with suspicion due to the undemocratic nature of its political system. The question was whether to view the country as a partner, colonizer or exploiter. "Africa needs alternatives to China. Therein lies the chance for India," an analyst says.
2) Cheaper land for Indians: Land is one of the most pricey things in India. In Africa, it is cheaper. This has prompted many Indian companies and individuals to migrate to African countries for farming. Karuturi Global is one Indian company with huge tracts of land in Ethiopia. Many farmers from Punjab too have migrated to the country eyeing cheap land. However, according to this report, their experience has not been good. There is strong local resistance and also lack of a viable market for their produce. The local resistance is mainly because of allegations that Indians are engaged in land grab there. The Indian government should take measures to address the problem. Only that can overcome the trust deficit Africans have about Indians. And land can be a point where both India and Africa have a common interest.
3) Abundant resources for India: Africa has abundant energy resources, while India is energy hungry. The continent has potential to fuel India's growth. Precisely that is the reason why companies like Jindal Steel and Power are exploring opportunities in countries there. Jindal operates one of the largest mines in the coal-rich Tete province Mozambique. However, it has to be kept in mind that India is tapping the resources at a time when climate change is wreaking havoc in the continent. Indian companies that are engaged in mining or exploring natural resources have to be sensitive to this issue.
As explained above for each opportunity that Africa offers to India, there are problem areas that need urgent attention. If Modi addresses them, it will send a message to Africans that India is different from other countries that are more exploiters than partners in development. That will help India become truly an alternative to China in Africa.
Updated Date: Jul 07, 2016 15:13 PM