Economic relations of Ethiopia and India: Trade and agricultural investments after 1991

Abstract

The main objective of this article is to critically examine the Post-1991 bilateral trade relations between the two countries and Indian agricultural investments in Ethiopia. To achieve the objective of this article, the study used qualitative research methodology. Data were collected from both primary and secondary sources. Available literature was also reviewed. For the collection of primary data, in-depth interviews were conducted with officials from Ethiopian Investment Commission, Ministry of Foreign Affairs, Ministry of Trade, and Agricultural Investment and Land Administration Agency. The findings from data analysis show that the economic relationships between the two countries are in favor of India in trade and agricultural investments. The study showed 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 Agricultural investments in Ethiopia created permanent and temporary job opportunities for Ethiopians; it has also increased government revenues and brought foreign currency and technology transfer. On the other hand, Indian investments in agriculture have 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 so that the expected benefit would be insured.