New Delhi: Struggling to compete with China, which has stolen a march for natural resources among what were long considered traditional allies in Africa, India is set to unveil a major trade policy initiative: permit duty-free imports from the continent.
Building ties: Prime Minister Manmohan Singh upon his arrival at Abuja last year. With him is Nigerian foreign minister Ojo Maduekwe.
“In principle, a decision has already been made. An announcement would be made by the government at the upcoming Africa summit in New Delhi in April,” said a commerce ministry official who did not want to be identified.
At $8.3 billion (Rs32,868 crore), India’s total imports with Africa in fiscal 2006-07, the latest period for which country-wise trade data is available, were under 7% of the country’s overall imports.
However, with a growth rate of more than 54%, imports with Africa grew faster than with any other trading block.
The total trade with Africa for 2006-07 was around $20 billion with exports to Africa growing by more than 180%.
At the same time, the Indian government’s thinking is that the move will also bolster its position at the international high table of trade negotiators.
Along with Brazil, India will only be the second developing country to offer this facility, or the so-called duty-free and quota-free regime, to Africa.
“It allows a leadership role for India,” the commerce ministry official said.
While symbolic, some experts say the duty waiver will not lead to a big fillip in the trade turnover between India and Africa.
“I doubt if this will make a lot of difference to the trade that we already have. This seems more of a goodwill gesture in keeping with the WTO (World Trade Organization) commitment,” said Rajesh Chadha, principal economist, National Council of Applied Economic Research said.
Describing the proposal as “a symbolic gesture”, Rajiv Kumar, director and chief executive, Indian Council for Research on International Economic Relations, an external relations think tank, said, “The duty on primary products is already quite low, around 2-3%. So, it is one of those measures that sound better than when it is implemented”.
What African nations need, he added, is help with skill formation and technological development.
“Measures to promote technological skill transfer, quadrupling the number of seats for African students in Indian higher educational institutions, and better communications with each nation would really go a long way,” he said.
For decades, the Union government has had very strong relationships with most African countries, stemming from India’s support for African leaders-turned-presidents who fought for independence from their colonial rulers. But, in recent years, India discovered that the relationships were overtaken by economic diplomacy and aid from China, putting India’s economic interests at a significant disadvantage.
India has, in recent years, scrambled to have a cohesive, economic diplomacy policy for Africa.
With its symbolic move, India is hoping to use this major trade concession to try and swing deals in favour of its oil companies, such as ONGC Videsh Ltd, a unit of Oil and Natural Gas Corp. Ltd, Oil India Ltd and Indian Oil Corp. Ltd, that have been trying to acquire equity stakes in oil and gas blocks in Africa.
“Some of the countries that these oil companies are looking to target include Libya, Nigeria, Algeria, Angola, Sudan, Egypt, Gabon, Congo, Chad, Cameroon, Tunisia, Ghana, Ethiopia and Mozambique,” said a senior petroleum and natural gas ministry official who also didn’t want to be identified.
The Union ministry of commerce, which is working on the final outline of the policy, has based it on inputs from other ministries including that of petroleum and natural gas.
According to the data for the period of April-September last year, bulk of the imports from within Africa came from Nigeria (almost 50% of the imports), South Africa (28%), Guinea (8%) and Angola (4%).
During this period, almost 99% of the imports from Nigeria and Angola and almost 78% from Guinea constituted of mineral fuels and mineral oils. More than 60% of imports from South Africa are precious and semi-precious stones.
The duty-free and quota-free regime system was created as part of the Hong Kong ministerial declaration of the WTO meeting and designed keeping in mind the global economic inequalities and the need to assist less developed countries. Accordingly, developed countries had committed to accord this facility to less developed countries, including Africa.
Siddhartha Sarma and Paromita Shastri contributed to this story.