Indian Foreign Direct Investment in Africa

Indian Foreign Direct Investment in Africa

The entry of Indian companies into Africa is largely market and resource seeking which offers much more potential in terms of promoting forward and backward linkages and in terms of impacting on competition in the domestic market. The increasing competitiveness of Indian firms and their interest to expand globally, particularly in IT-related services and pharmaceuticals, are driving its outward foreign direct investment (FDI) growth. Indian FDI to Africa is concentrated in oil, gas and mining in the primary commodities market. In the manufacturing sector, a dominance of automobile and pharmaceutical firms can be seen. Most of the Indian FDI in African countries is through greenfield investments (GIs) and joint ventures (JVs) that are desired by the host countries due to their contribution in creating new production capacity and generating employment, transfer of technology, etc. A number of factors have been identified that motivates Indian investors to invest in Africa. The factors are socio-cultural factors, host country policies, regional integration agreements, bilateral investment treaties (BITs), gross domestic product (GDP) growth and political economy factors. There is no denying that language, culture, presence of Diaspora does play a role in attracting FDI. The relationship between India and Africa exists and functions at all these multilateral levels as politics and commerce converge.