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INDIA'S ECONOMIC INFLUENCE IN AFRICA VS CHINA



  May 20, 2024

INDIA'S ECONOMIC INFLUENCE IN AFRICA VS CHINA


What Is India's Current Economic Presence in Africa?

Trade and Investment

- Bilateral Trade: In FY23, India's bilateral trade with Africa reached almost $100 billion, whereas China's trade with the continent was nearly $282 billion.

- Foreign Direct Investment (FDI): In 2021, India was among the top 10 countries with the highest FDI flows to Africa, with $14 billion, while China ranked fifth with $44 billion.

Key Sectors

- Telecommunications: Indian telecom giant Airtel is a leading mobile service provider in Africa and has recently launched affordable 4G smartphones in Rwanda.

- Automobiles: Mahindra and Bajaj have a significant presence, with Mahindra Scorpios used by Nairobi's police force and Bajaj rolling out a compact quadricycle in South Africa.

How Is India Leveraging Its Strengths in Africa?

MSME Sector

- Filling Economic Gaps: Indian MSMEs are crucial for providing basic goods and services, bridging gaps that large-scale investments may overlook.

- Digital Public Goods: Initiatives like India Stack are being extended to African countries, offering open-source digital infrastructure.

Strategic Investments

- Triangular Projects: Collaborating with countries like the UK, France, and Germany to launch development projects in Africa, focusing on sectors such as agriculture and technology.

- Private Capital: Unlike China's state-led investments, India's investments are largely private, minimizing political strings and aligning more with African sensitivities.

Why Is India's Approach Effective?

Historical and Cultural Ties

- Long-Standing Presence: Indian entrepreneurs have deep-rooted knowledge of African markets dating back to pre-colonial times.

- Language Advantage: English proficiency in eastern and southern Africa aids in smoother interactions with government and business entities.

Pragmatic Cooperation

- Geopolitical Neutrality: India is seen as a trusted interlocutor in the geopolitical tussle between China and the West, maintaining good relations with both sides.

- Focus on Local Needs: India's investments focus on intermediate goods and services rather than advanced technology, aligning with Africa's current development priorities.

Future Prospects

- Growing Influence: Despite being behind China in trade volume, India's strategic use of its strengths and 'trump cards' like the MSME sector and triangular collaborations could significantly enhance its influence in Africa.

- Sustainable Development: India's emphasis on sustainable and viable development financing contrasts with China's controversial debt-trap diplomacy.




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