Deepening India’s engagement with Africa through better market access

Deepening India’s engagement with Africa through better market access

In order to provide ‘trade’ stimulus to Least Developed Countries (LDCs), India launched a Duty-Free Tariff Preferences (DFTP) scheme in 2008. DFTP scheme provides duty free treatment to about 98 per cent of tariff lines and 48 LDCs are beneficiary of this scheme. Preliminary evidence indicates the effect of the scheme has been limited and varies from country to country. In order to improve the effectiveness of the DFTP scheme, a number of concrete actions and policy changes, by both the Indian Government and LDCs are required.

This policy brief assesses the implementation and impact of the DFTP scheme on three African countries Ethiopia, Uganda and Tanzania.

Conclusions:

  • simulation results suggest that global welfare and welfare of African LDCs would increase by USD 561 million and USD 1201 million, respectively, if India moved to a 100 per cent duty-free quota-free regime

  • the loss to India would be a paltry USD 171 million, which, in any case, could be compensated by the resulting dynamic gains from liberalisation over the long term

  • if the Government of India intends on using this scheme as a means to facilitate exports from LDCs, it should increase efforts in ommunicating with respective stakeholders in LDCs

  • given that the scheme excludes products of key interest to LDCs, India could improve the effectiveness of the scheme by extending its product coverage

  • in addition to enhancing the coverage of the DFTP, India can do much to build the productive capacity in LDCs through aid, investment and technological collaboration

  • Indian FDI can be a conduit for technology transfer and knowledge spill-overs, and can therefore play an important role in the structural transformation of LDCs

  •  more importantly, non-tariff barriers need to be removed over time to stimulate exports of LDCs

 

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