A new Afro-Indian trade partnership is a huge opportunity for both

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The writer is a non-resident fellow in the Africa Growth Initiative at the Brookings Institution

India’s presidency of the G20 delivered one of the most significant shifts in global governance in a decade: representation for 1.4bn people at the world’s premier economic co-ordination body.

The recent summit in New Delhi brokered permanent membership of the body for the African Union, with the potential to create a growth story for the continent over the next decade.

Despite predictions of the end of globalisation, world trade has remained resilient in the face of successive shocks — notably the Covid-19 pandemic and Russia’s invasion of Ukraine.

Buoyed by rising commodity prices, global trade was up 26 per cent in 2022 on pre-pandemic 2019 numbers. But while 2023 may be more subdued as central banks battle inflation and the Chinese economy slows, international trade will remain resilient, even if buffeted by geopolitics.

There is an opportunity here for both Africa and India. Despite a combined population of 2.8bn people, the two regions command a relatively small share of global trade: 2.8 per cent and 3 per cent for India and Africa respectively. (By comparison, China accounts for 14 per cent, the US 8 per cent and Germany 7 per cent).

Between 2001 and 2017, trade between the pair increased from $7.2bn to almost $60bn. But this is only the start of the story. For, when it comes to trade composition, relations between the two have barely changed in a decade. India imports mostly fuel and chemicals from Africa. It exports fuel and pharmaceutical products to Africa, mainly to five countries.

However, the growth of the next 25 years will be green and it will be digital. And India and Africa, with their increasing incomes and population trends, could be significant markets.

More importantly, they could also supply the world with both intermediary and finished products in EV cars, green housing, green fertiliser, renewable energy and digital infrastructure. That’s an estimated global opportunity worth more than $20tn between now and 2040.

To make the most of it, both India and Africa should implement a four-point plan to double their share of world trade by 2030.

First, they should work on a free trade agreement that takes advantage of the reshaping of global trade relations. African countries and India have a long history of trade. They also belong to many of the same global platforms, such as the Commonwealth and other bodies.

Their priority should be developing a joint trade strategy focused on strategic sectors. In some there will be creative competition; in others it will be collaboration that leads to more optimal outcomes.

Second, create and fund dedicated institutions that support trade and investment between Africa and India, such as export-import banks, reinsurance facilities and others. Identify bottlenecks for investment and partnerships on both sides and work to lift them.

Third, harness digital technology. India has made great strides on digital inclusion. Its Aadhaar biometric ID system should serve as a model for a more digitally inclusive Africa, where millions in countries across the continent lack an official identity. Such technologies would contribute to more effective government spending, financial inclusion and growth.

Finally, Africa and India should redefine their energy and green economy partnership. Over 80 per cent of India’s energy needs are met by three fuels: coal, oil and solid biomass, making the country the third-largest global emitter of CO₂.

With its abundant supply of renewable and transition energies such as gas and hydrogen, both natural and green, Africa can support India’s transition to a green economy in an affordable and predictable way. This will increase the competitiveness of both regions and allow them to expand into other markets, including the US and EU.

The infrastructure deal designed to counter China’s Belt and Road Initiative, and brokered by Indian prime minister Narendra Modi at the G20, could lay the roads, railways, data and energy pipelines required to make this Afro-Indian partnership a reality. A more integrated trading relationship will deliver increased growth and prosperity for both.