Indian firms considering Africa expansion to bypass US tariffs
What's the story
In the wake of the US imposing steep tariffs on Indian goods, several Indian companies are looking to shift their production bases to Africa. The move is aimed at sidestepping the high levies and continuing exports to the US. Among those considering this shift are Gokaldas Exports and Raymond Lifestyle, who plan to take advantage of lower tariffs in some African countries.
Tariff impact
US tariffs on India
The US has imposed one of the steepest tariffs globally on India for buying Russian oil. The new levy is as high as 50% on Indian exports, severely impacting labor-intensive sectors like jewelry and apparel. A Bloomberg Economics note this week warned that US levies could cut exports of certain goods by up to 90%.
Export reduction
Gokaldas Exports's plans for Africa
The overall exports from India to the US, its biggest market, could be reduced by more than half due to the new tariffs. In 2023 alone, India exported over $20 billion worth of textile products, jewelry, and diamonds to the US. Gokaldas Exports' Managing Director Sivaramakrishnan Ganapathi said they will continue expanding in Africa even with these high tariffs.
Production shift
Raymond Lifestyle's strategy
Raymond Lifestyle is also looking at shifting some of its production to Africa. The company's CFO Amit Agarwal said they are in talks with American customers to ship more products from their Ethiopia plant. Dharmanandan Diamonds, a Surat-based gems exporter, is also considering ramping up production in Botswana if the US continues with high tariffs.
Strategic shift
Africa as a strategic alternative for Indian firms
Africa has emerged as a strategic alternative for Indian firms looking for favorable tariff spots to service the US market. Countries like Ethiopia, Nigeria, Botswana, and Morocco already offer tax holidays and exemptions from customs duty and VAT. They are also promising sector-specific incentives and creating special economic zones to attract investments.