Context

• India’s engagement with Africa has entered a renewed and strategically significant phase, shaped by global economic uncertainty and changing geopolitical realities.
• Prime Minister Narendra Modi’s visits to African countries in 2025 underscore Africa’s growing importance in India’s foreign economic policy.
• While India and Africa share long-standing cultural and political ties, their relationship is now increasingly driven by economics.
• Amid restructuring global supply chains and the emergence of a multipolar world order, Africa has become central to India’s long-term economic aspirations.

The Global Context: Uncertainty in Traditional Markets

• A key driver of India’s intensified focus on Africa is rising uncertainty in traditional Western markets.
• In FY24, around 40% of India’s exports were directed to the United States and the European Union, exposing India to risks from economic slowdowns, protectionism, and policy volatility. Diversifying export destinations has therefore become imperative.
• Africa, with its expanding population, growing consumer markets, and industrial potential, offers a viable alternative for reducing dependence on the West.

Current Trade Dynamics and Comparative Disadvantages

• India is Africa’s fourth-largest trading partner, with bilateral trade nearing $100 billion, yet its presence remains limited compared to China.
• China’s trade with Africa exceeds $200 billion, accounting for over 21% of Africa’s imports, with a strong concentration in high-value industrial goods such as machinery, electrical equipment, and semiconductors.
• In contrast, India’s exports remain dominated by petroleum products, pharmaceuticals, rice, and textiles, reflecting a lower degree of industrial integration.
• This imbalance highlights the need for India to move beyond traditional exports and strengthen its manufacturing and technology footprint.

A Five-Pillar Strategy for Deeper Engagement

• Reducing Trade Barriers
  • The first pillar focuses on reducing trade barriers through preferential trade agreements and comprehensive economic partnerships, particularly with African regional economic communities.
  • Deeper engagement with the African Continental Free Trade Area (AfCFTA) can provide Indian exporters access to a more integrated continental market.
• Value Added Manufacturing and Joint Ventures
  • The second pillar emphasises transitioning from low-value commodity exports to value-added manufacturing and joint ventures.
  • Establishing manufacturing units in Africa offers Indian firms dual advantages.
  • Preferential access to Western markets through favourable tariff regimes and direct participation in Africa’s growing industrial base.
  • Better utilisation of incentives offered by African governments remains critical to achieving this shift.
• Scaling Up Trade Finance
  • The third pillar prioritises scaling up trade finance and Lines of Credit, especially to support micro, small, and medium enterprises (MSMEs).
  • African markets present greater entry opportunities for MSMEs than highly competitive Western economies.
  • However, limited access to finance, high perceived risk, and insufficient policy focus constrain their participation.
  • Measures such as local currency trade, joint insurance pools, and improved credit access could significantly enhance MSME engagement.
• Infrastructure, Services, and Connectivity
  • The fourth pillar focuses on reducing freight and logistics costs through investments in port modernisation, hinterland connectivity, and India–Africa maritime corridors.
  • Improved infrastructure is essential to making trade competitive and sustainable.
• Digital Co-Operation and People to People Connect
  • The fifth pillar stresses the importance of services trade, digital connectivity, and people-to-people ties.
  • India’s strengths in information technology, healthcare, professional services, and skill development position it as a valuable partner for African economies.
  • Expanding services exports can generate high value and stimulate goods trade, though existing policy frameworks require substantial improvement to realise this potential.

Investment and the Role of the Public Sector

• Sustained engagement with Africa also depends on stronger investment ties.
• Currently, Indian investments are distorted by financial flows routed through Mauritius, often aimed at tax optimisation rather than productive investment.
• Bureaucratic hurdles, political instability, and high financing costs further deter private firms.
• In this context, Indian public sector units can play a catalytic role, particularly in mining, mineral exploration, infrastructure, renewable energy, and critical technologies, helping de-risk markets and attract private investment.

Conclusion

• India’s engagement with Africa must move beyond transactional trade toward long-term, sustainable partnerships.
• As global supply chains realign and economic power becomes more distributed, Africa will remain central to India’s global ambitions.
• The moment is ripe for India to recalibrate its economic diplomacy, strengthen institutional mechanisms, and deepen its economic footprint across the continent.
• Achieving this will require not only ambition but also effective execution, policy coherence, and sustained political commitment.