In a speech last week at the London School of Economics, Dr. Amit Mitra, the Secretary General of the Federation of Indian Chambers of Commerce and Industry discussed the growing role of Indian investment in Africa.
Despite the relatively neglected role of India in Africa compared with that of China, India’s trade with the continent has grown ten-fold over 4 years to $39.5 billion in 2008-09 (over half of the US’s $77 billion). The turning point, he noted, came in 2008 with the India-Africa summit in Delhi, which led to a doubling of credit to Africa (to $5.4 billion over 5 years), a focus on African human capital development programs, and a duty free preferential tariff scheme for the 34 least developed countries in Africa (with 94% of all tariff lines opened).
Mitra cited the young population, the second fastest growth rate of any continent, and the possession of nearly a third of the world’s natural resource value as the main motivations for India’s interest in Africa.
However, Mitra also took the opportunity to highlight the unique approach taken by India compared to China. He suggested that while Chinese investments were merely extractive in purpose, India’s were more transformative, focusing on small and medium businesses, agricultural productivity, information technology, and investments in health care.
Mitra also criticized Western governments for failing to develop strategic plans and not taking Africa seriously as the future. He further suggested that “India understands the needs of Africa” and has supported African efforts to eliminate developed world agriculture subsidies. The Indian economist concluded by suggesting that foreign direct investment was surpassing aid in importance, and that the transparency of aid needs to be improved. But he did suggest that aid still has an important role in addressing areas where the market fails such as health and education.