Assesing the Post-1991 Ethio-India Economic Relations: A Study on Trade and Agricultural Investments
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Date
2016-05
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Addis Ababa University
Abstract
Ethiopia has had long-standing bilateral relations with India. Trade and commercial contacts
between the two countries flourished during and since the ancient Axumite Empire. India
achieved its independence from British colonial rule in August 1947. After one year of its
independence, India has established official diplomatic relations with Ethiopia. However, the
year 1991 was the turning point in the relations between the two countries. After 1991, the
bilateral relations manifest in terms of economics and trade. The main objective of this study is
to critically examine the Post-1991 Ethio-India economic relations. It aims to assess the bilateral
trade relations between the two countries and Indian agricultural investments in Ethiopia. To
study these issues, the study has used qualitative research methodology. Data have been
collected both from primary and secondary sources. Available literatures were reviewed to
discuss about historical relations and bilateral economic relations between the two countries.
Additionally, in-depth interviews were conducted with officials from Ethiopian Investment
Commission, Ministry of Foreign Affairs, Ministry of Trade, and Agricultural Investment Land
Administration Agency for the collection of primary data. The findings from data analysis show
that the economic relationships between the two countries are in favor of India in trade and
agricultural investments. After critical analysis of trade data between Ethiopia and India, this
paper has found that Ethiopia has chronically run a negative balance in its trade with India.
Ethiopia’s trade deficit can largely be explained by the unequal terms of trade between
agricultural commodities (the country’s major exports) and capital goods (the country’s major
imports). With regard to agricultural investment, Indian agricultural investments have both
positive and negative impacts on local peoples where they are operating. Indian Agriculture
investments in Ethiopia created permanent and temporary job opportunities for Ethiopians; it
has also increased government revenues, and has brought foreign currency and technology
transfer. On the other hand, Indian investments in agriculture do not alleviate food insecurity in
Ethiopia and it has also caused the displacement of smallholder farmers and the degradation of
natural resources. In response to trade imbalance, Ethiopia needs to focus on diversifying the
composition of its exports and improving the business climate through infrastructural
development, building strong institutions and reducing bureaucratic problems. Indian
agricultural investments in Ethiopia also need encouragement, support and critical follow up in
order to provide the expected benefits for Ethiopians.
Key Concepts: Globalization, Economic Cooperation, South-South Cooperation, FDI and Trade
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Keywords
Globalization, Economic Cooperation, South-South Cooperation, FDI and Trade