Why Kenya should pay more attention to India after Narendra Modi’s election

India’s new Prime Minister Narendra Modi a day after he was sworn in. Many economists have predicted a U type of recovery for India with Modi in charge. Photo/FILE 

By MARVIN SISSEY

In Summary

• Our historical ties, geographical closeness and growing trade offer more potential than China.

On November 7 last year, the Business Daily ran a story that probably passed many readers unawares. The story’s title was India beats China in Kenya trade deals.

 

Citing the Kenya National Bureau of Statistics, eight months into last year, Kenya’s imports from India were worth Sh144 billion compared to Sh114 billion imports from China.

In the comparative period the previous year, India had Sh122 billion worth of exports to Kenya comparable to Sh113 billion from China.

Around the same time, London-based Overseas Development Institute (ODI) released a report that showed that in Africa, Kenyan businesses received most funding from Indian banks in the past five years.

The report by ODI on international private capital flows showed Indian banks increased lending to Kenyan businesses six-fold between 2005 and 2012, the corresponding period within which the emerging Asian economic giant had become the leading source of Kenyan imports.

In fact, when compared to other low income African countries, the report showed that Kenya attracted the lion’s share of cross-border bank lending.

None of the other 19 African low income countries then got more than $100 million (that Kenya got) in lending from Indian banks.

This increased import bill from China has obviously created a related increase in the balance of payments bill for our country.

Some of the materials we import from India include petroleum oils, medicaments, flat-rolled products, iron or non-alloy steel, electric power machinery, food-processing machines, textile yarn, electrical machinery and apparatus, motor vehicles, equipment for distributing electricity andgeneral purpose machinery.

Contrast this with what we export to India — metallic salts and peroxysalts of inorganic acids, vegetables, roots, tubers and other edible vegetable products, crude minerals, tea, leather, wool and other animal hair, lead, non-ferrous base metal, pearls, precious and semi-precious stones, textile and leather machinery.

Our lack of manufacturing muscle has meant that our export value largely pales in comparison with our import value placing us at a serious trade disadvantage.

Nevertheless, it also means that even as we consider building relationships with our trading partners, those who consume most of our foreign exchange dollars need to be optimum on our radar.

The government obviously seems to agree with this hence the adoption of looking East as an economic strategy. Unfortunately, politically at least, our eyes seem so transfixed on China at the expense of other partners.

On the positive side, this has led to the strengthening of Sino-Kenya ties, which may prove critical in geo-political shape up. All this may be good on paper in the short run.

But it would be disastrous for Kenya to ignore other trading partners who may prove to equally strategic. In particular, it would be disastrous for Kenya to ignore India