UPSC Daily Current Affairs - 23th December 2025
Source: The Hindu
Relevance: GS -2: Bilateral, regional, and global groupings/agreements involving India.
Important Key Concepts for Prelims and Mains:
For Prelims:
- African Union (AU), AfCFTA, India–Africa Trade, Lines of Credit, MSMEs, Maritime Corridors, Services Trade
For Mains:
- India–Africa economic partnership, trade diversification strategy, AfCFTA and India, MSME-led exports, public sector role in Africa, multipolar world order
Why in News?
Prime Minister Narendra Modi’s high-level visits to Namibia and Ghana (July 2025) and Ethiopia (December 2025) have renewed strategic focus on India–Africa economic relations. These engagements come amid global economic uncertainty and India’s need to diversify trade, investment, and supply-chain partnerships beyond traditional Western markets.
Background: Evolution of India–Africa Engagement
India and Africa share a long history of civilisational links, anti-colonial solidarity, and South–South cooperation. While political and cultural ties dominated earlier phases, the relationship has increasingly assumed a strong economic orientation in the 21st century.
A major milestone was the African Union’s induction as a permanent G20 member in 2023, during India’s G20 Presidency, symbolising Africa’s rising global economic and political relevance and India’s support for African multilateral voice.
Global Context: Uncertainty in Traditional Export Markets
- In FY24, nearly 40% of India’s exports were directed to the United States and the European Union.
- These markets face:
- Economic slowdown risks
- Rising protectionism
- Geopolitical uncertainty
- Overdependence on Western markets exposes India to external demand shocks.
Africa, with its young population, rapid urbanisation, expanding middle class, and industrial potential, offers India an alternative growth frontier and export diversification opportunity.
Current Trade Dynamics: India vs China in Africa
- India–Africa trade: ~ $100 billion (India is Africa’s 4th-largest trading partner).
- India’s exports:
- Petroleum products
- Pharmaceuticals
- Rice
- Textiles
- Engineering goods
- Africa imports around 6% of its total imports from India.
Comparative Disadvantage
- China–Africa trade exceeds $200 billion.
- About 21% of Africa’s imports come from China.
- Nearly 33% of Chinese exports fall under HSN 84 & 85 (machinery, electrical equipment, semiconductors).
India’s trade basket remains commodity-heavy, while China dominates high-value industrial goods, highlighting India’s limited industrial integration with African economies.
India’s Target: Doubling Trade with Africa by 2030
To bridge this gap, India has set an ambitious target of doubling bilateral trade with Africa by 2030, requiring a structural shift in engagement strategy.
Five-Pillar Strategy for Deepening India–Africa Economic Ties
1. Reducing Trade Barriers & Institutional Integration
- Negotiate:
- Preferential Trade Agreements (PTAs)
- Comprehensive Economic Partnership Agreements (CEPAs)
- Deepen engagement with African Continental Free Trade Area (AfCFTA), which integrates a 54-country market.
- This would provide Indian exporters scale, predictability, and lower tariff barriers.
2. Transition to Value-Added Manufacturing & Joint Ventures
- Shift from low-value exports to:
- Manufacturing partnerships
- Cross-border joint ventures
- Manufacturing in Africa offers:
- Access to Africa’s growing consumer market
- Preferential tariff access to the US and EU under African trade regimes
- Indian firms underutilise African industrial incentives, requiring better policy facilitation.
3. Scaling Up Trade Finance with MSME Focus
- Africa presents lower entry barriers for MSMEs compared to Western markets.
- Constraints faced by MSMEs:
- Limited trade finance
- High perceived political risk
- Lack of insurance mechanisms
- Required interventions:
- Expansion of Lines of Credit
- Trade in local currencies
- Creation of joint insurance pools to cover political and commercial risks
- This can significantly increase MSME participation in India–Africa trade.
4. Infrastructure, Logistics & Connectivity
- High freight and logistics costs undermine trade competitiveness.
- Priority areas:
- Port modernisation
- Hinterland connectivity
- Development of India–Africa maritime corridors
- Infrastructure investments are crucial for sustainable and cost-efficient trade flows.
5. Services Trade, Digital Cooperation & People-to-People Links
- India has a comparative advantage in:
- Information Technology
- Healthcare
- Professional services
- Skill development
- Services trade:
- Generates high-value exports
- Facilitates goods trade integration
- Current policy frameworks inadequately support services exports to Africa and need reform.
Investment Dimension & Role of the Public Sector
- India’s FDI in Africa is distorted due to routing via Mauritius, often aimed at tax optimisation rather than productive investment.
- Barriers include:
- Bureaucratic hurdles
- Political instability
- High financing costs
Public Sector Leadership
Indian Public Sector Units (PSUs) can act as anchors by investing in:
- Mining and mineral exploration
- Infrastructure
- Renewable energy
- Critical and emerging technologies
PSUs can de-risk African markets, attract private capital, and deepen long-term economic engagement.
Strategic Significance for India
- Enhances export diversification
- Strengthens supply chain resilience
- Secures access to critical minerals
- Supports India’s ambition in a multipolar global order
- Reinforces South–South cooperation and development diplomacy
Conclusion
India’s engagement with Africa must evolve from transactional trade to long-term, sustainable economic partnerships. As global supply chains realign and economic power becomes more distributed, Africa will remain central to India’s global aspirations. Achieving this vision demands policy coherence, institutional coordination, strong public sector leadership, and sustained political commitment.
CARE MCQ
Q. Consider the following statements regarding key focus areas of India–Africa economic ties:
- Limited access to trade finance and insurance constrains MSME participation in India–Africa trade.
- Infrastructure investments such as ports and maritime corridors are essential for reducing logistics costs.
- Services trade plays a marginal role and is excluded from India’s Africa engagement strategy.
How many of the above statements are correct?
A. Only one
B. Only two
C. All three
D. None
Answer: B
Explanation:
- Statement 1 – Correct: MSMEs face challenges like limited trade finance, risk perception, and lack of insurance.
- Statement 2 – Correct: Ports, connectivity, and logistics infrastructure are crucial for cost-efficient trade.
- Statement 3 – Incorrect: Services trade (IT, healthcare, skills) is a major pillar of India–Africa cooperation.
Source: The Hindu
Relevance:
GS Paper II – India’s Foreign Policy, Bilateral Relations, Gulf Cooperation Council (GCC)
GS Paper III – International Trade, Services, Employment, MSMEs, Investment
Important Key Concepts for Prelims and Mains:
For Prelims:
- Comprehensive Economic Partnership Agreement (CEPA), Tariff lines, Mode 4, Labour-intensive sectors, GCC
For Mains:
- Trade liberalisation, Services mobility, MSME competitiveness, Export diversification, Strategic economic partnership
Why in News?
- India and Oman signed a Comprehensive Economic Partnership Agreement (CEPA) .
- Under the agreement:
- Oman will provide duty-free access on 98.08% of its tariff lines, covering 99.38% of India’s exports by value.
- India will liberalise tariffs on 77.79% of its tariff lines, covering 94.81% of imports from Oman.
- The agreement was signed in the presence of Narendra Modi and Sultan Haitham bin Tarik.
What are the Core Features of the India–Oman CEPA?
- The CEPA provides near-universal market access for Indian exports to Oman.
- Immediate tariff elimination ensures quick and tangible benefits for Indian exporters.
- India has safeguarded domestic interests by excluding sensitive products, including:
- Dairy, tea, coffee, rubber, tobacco
- Gold and silver bullion and jewellery
- Footwear, sports goods
- Scrap of several base metals
- The agreement extends beyond merchandise trade to include:
- Services
- Investment
- Mobility of professionals
How Does the Agreement Benefit Labour-Intensive Sectors?
- The agreement provides full tariff elimination for key labour-intensive sectors such as:
- Gems and jewellery
- Textiles and apparel
- Leather and footwear
- Sports goods
- Plastics and furniture
- Agricultural products
- Engineering goods
- Pharmaceuticals and medical devices
- Automobiles
- Expected outcomes include:
- Employment generation
- Strengthening of MSMEs, artisans and women-led enterprises
- Improved competitiveness of Indian exports
- According to Piyush Goyal, the agreement is balanced and ambitious, aimed at boosting trade, strengthening supply chains, and deepening long-term economic partnership.
What are the Provisions for Services and Worker Mobility?
Enhanced Mobility Framework
- For the first time, Oman has offered wide-ranging Mode 4 commitments:
- Intra-Corporate Transferees quota increased from 20% to 50%
- Duration of stay for Contractual Service Suppliers extended:
- From 90 days to two years
- With the possibility of a further two-year extension
- More liberal entry and stay conditions are provided for professionals in:
- Accountancy
- Taxation
- Architecture
- Medical and allied services
Boost to Services Sector
- Oman has offered a comprehensive and forward-looking services package covering:
- Computer-related services
- Business and professional services
- Audio-visual services
- Research and development
- Education and health services
- The agreement allows 100% Foreign Direct Investment by Indian companies in major services sectors in Oman.
- Both countries have agreed to hold future discussions on social security coordination.
- Capital: Muscat
- Region: West Asia / Middle East
- Political grouping: Member of the Gulf Cooperation Council (GCC)
- Status: Oldest independent state in the Arab world
- Land borders:
- Yemen (South-West)
- Saudi Arabia (West)
- United Arab Emirates (North-West)
- Water bodies:
- Arabian Sea (South & East)
- Gulf of Oman (North)
- Rub al-Khali (Empty Quarter): One of the world’s largest sand deserts
- Hajar Mountains: Northern Oman
- Dhofar Range: Southern Oman (monsoon-influenced region)
- Petroleum
- Natural Gas
- Copper
- Limestone
- Asbestos
What is the Current India–Oman Trade Profile?
Trade Volume (2024–25)
- India’s exports to Oman:
- $4.06 billion, accounting for 0.93% of India’s total exports
- India’s imports from Oman:
- $6.5 billion, accounting for 0.91% of India’s total imports
Export Composition
- Petroleum products – 35.1%
- Processed minerals – 9.2%
- Aircraft and spacecraft parts – 4.3%
- Cosmetics and toiletries – 3.6%
- Basmati rice – 3.6%
Import Composition
- Crude oil and petroleum gases – 38%
- Mineral or chemical fertilisers – 16.3%
- Acyclic alcohols – 6.6%
- Ammonia – 5.8%
Why is the CEPA Strategically Significant?
- It is Oman’s first bilateral trade agreement since 2006.
- It is India’s second CEPA with a GCC country, after the UAE (2022).
- The agreement positions Oman as a gateway for India to:
- The GCC region
- Eastern Europe
- Central Asia
- Africa
- The CEPA is expected to infuse new momentum into bilateral trade, investment and services cooperation.
Conclusion
The India–Oman CEPA represents a comprehensive and forward-looking trade agreement that combines near-total tariff elimination with meaningful commitments in services and professional mobility. By protecting sensitive domestic sectors while expanding opportunities for labour-intensive industries and service providers, the agreement strengthens India’s economic engagement with the Gulf region and supports employment generation, MSME growth and long-term strategic partnership.
UPSC PYQ
Which of the following is not a member of the Gulf Cooperation Council (GCC)? (2016)
- Saudi Arabia
- Oman
- Kuwait
- United Arab Emirates
- Qatar
- Bahrain
CARE MCQ
Q. Exercise Naseem Al Bahr, recently seen in news, is best described as:
(a) A multilateral naval exercise involving India and Gulf Cooperation Council countries
(b) A bilateral naval exercise between India and Oman focusing on maritime interoperability
(c) A joint air–naval exercise between India and Oman conducted only in the Arabian Sea
(d) A coastal security exercise conducted under the Indian Ocean Rim AssociationCorrect Answer: (b) A bilateral naval exercise between India and Oman focusing on maritime interoperability
Explanation:
- Naseem Al Bahr is a bilateral naval exercise conducted between India and Oman.
- It was initiated in 1993, symbolising the long-term strategic maritime partnership between the two countries.
- Oman is the first Gulf Cooperation Council (GCC) country to conduct bilateral naval exercises with India.
