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	India's Fast-Growing Trade Ties with Tanzania The Tanzanian economy grew by 7.1 percent in 2007, from 6.7 percent in the previous year, supported by a recovery in the agricultural sector and strong growth in the services sector after facing a draught situation in 2006. In 2008, it has been estimated to grow by 7.5 percent. In absolute terms, GDP increased from 14.4 percent in 2006 to US$ 16.7 billion, and has been estimated to increase further to US$ 20.6 billion. Consumer price inflation declined to 7.0 percent in 2007 from 7.3 percent in 2006, despite a rise in food and fuel prices in the world market. It has been, however, estimated to increase to 9.2 percent in 2008 (Table 1). According to National Bureau of Statistics, the services sector dominates the economy, accounting for 50.1 percent of GDP in 2007, followed by agriculture (27.7 percent of GDP) and industry (22.2 percent of GDP). Table 1: Macroeconomic Indicators of Tanzania Source: IMF and EIU. e- Estimates. Reflecting higher export earnings, especially from coffee exports, the average exchange rate of Tanzania appreciated by 0.6 percent to Tanzanian Shilling (Tsh) 1245.0: US$ 1 in 2007, over Tsh 1251.9 : US$ 1 in 2006. Tanzania's total international reserves rose by 27.6 percent from US$ 2281 mn in 2006 to US$ 2910 mn in 2007, providing an import cover of 7.2 months. Total external debt rose from US$ 4.2 bn in 2006 to US$ 4.4 bn in 2007. Trade and External Sector Tanzania's exports increased by 16.1 percent in 2007 to US$ 2.2 bn from US$ 1.9 bn in the previous year, bolstered by robust growth of gold exports, and have been estimated to increase further to US$ 2.4 bn in 2008. Imports increased by 25.8 percent to stand at US$ 4.9 bn in 2007 from US$ 3.9 bn in 2006. Imports have increased further to US$ 5.8 bn in 2008. Tanzania's trade deficit rose in 2007 to US$ 2.7 bn from the previous year's US$ 2.0 bn. Gold is Tanzania's largest export commodity. In 2006, gold exports account for 41.9 percent of Tanzania's total exports. The other significant exports in 2006 were coffee (4.3 percent), cotton (3.9 percent) and cashew nuts (2.7 percent). Tanzania's principal imports in 2006 were consumer goods (24.0 percent of total imports), machinery (22.2 percent), petroleum products (17.4 percent) and industrial raw materials (11.5 percent). The major destinations of Tanzania's exports in 2006 were China (8.9 percent of total exports), India (8.8 percent of total exports), the Netherlands (6.2 percent) and Japan (5.4 percent). The major origins of Tanzania's imports in 2006 were South Africa (10.0 percent of total imports), China (9.6 percent), Kenya (8.0 percent) and India (6.9 percent). Tanzania's current account deficit increased to an estimated US$ 1.5 bn in 2007 from US$ 1.1 bn in 2006. Bilateral Trade and Investment Ties between India & Tanzania India's exports to Tanzania nearly doubled in 2007-08 to US$560 mn from US$ 288.6 mn in 2006-07, mainly reflecting more than three and half fold increase in export of petroleum products, from US$ 37 mn to US$ 139.6 mn in 2007-08, supported by strong growth in exports of primary and semi-finished iron & steel, transport equipments and machinery and instruments. India's imports from Tanzania also increased from US$ 98.0 mn in 2006-07 to US$164.6 mn in 2007-08, registering a growth of 68 percent, mainly because of higher imports of pulses and cashew nuts. Thus, India's trade surplus with Tanzania more than doubled to US$ 395.4 mn during 2007-08, as compared to a surplus of US$ 190.6 mn in the previous year (Table 2). Table 2: India's Trade with Tanzania Note: Figures in parentheses indicate growth over the previous year. Source: Ministry of Commerce and Industry (MOCI), Government of India (GOI) & Exim Bank Analysis. An analysis of trends in India's exports to Tanzania during the last five years shows increase in the share of petroleum products in India's export basket, which has grown from as much as 2 percent of total exports to Tanzania in 2003-04 to one-fourth of total exports to Tanzania in 2007-08. The share of primary and semi-finished iron and steel also increased from 3.6 percent of total exports to Tanzania to 5.7 percent during the same period. The share of machinery, on the other hand, fell from 14 percent of India's total exports to Tanzania in 2003-04 to 9.7 percent of India's total exports to Tanzania. The top five commodities exported to Tanzania constitute more than 57 percent of India's total exports to Tanzania in 2007-08 (Chart 1). In 2007-08, petroleum products are the major export items of India to Tanzania followed by machinery & instruments, transport equipment, pharmaceutical products and primary & semi-finished iron & steel (Chart 2). Commodity-wise analysis of India's imports from Tanzania in the last five years shows that cashew nuts continued to remain the most important item imported by India from Tanzania, constituting 45-47 percent of India's total imports from Tanzania during the same period. The share of pulses in India's import basket increased by nearly three folds, from 7.8 percent in 2003-04 to 22.6 percent in 2007-08, and that of spices and Metaliferrous ores & metal scrap doubled during the same period. The share of pearls, precious & semiprecious stones, however, fell from 10 percent in 2003-04 to 5.1 percent in 2007-08. The top five commodities imported by India from Tanzania constitute more than 83 percent of India's total imports from the country (Chart 3 and Chart 4). Chart 3: Trends in India's Imports from Tanzania (US$ mn) Source: Adapted from MOCI, GOI data. Bilateral Investment Relationship During April-October 2008-09, India's export to Tanzania increased by more than two-fold, to US$ 704.4 mn from US$ 326.1 mn during the same period the previous year. India's import from Tanzania also increased to US$ 43.8 mn during April-October 2008-09 from US$ 39.0 mn registering a growth of 12.6 percent. India's approved direct investment outflows in joint ventures (JVs) and wholly owned subsidiaries (WOSs) to Tanzania amounted to US$ 5.2 mn during April 1996 to December 2007. FDI Inflows from Tanzania to India, on the other hand, amounts to US$ 0.55 mn during April 2000 to November 2008. Tanzania's Membership in major multilateral and regional organizations Tanzania is a member of almost all significant United Nations agencies and of international organizations, such as Non-Aligned Movement (NAM), Commonwealth, World Bank/International Monetary Fund (IMF), and World Trade Organization (WTO), as well as the Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC). In Africa, it is a member of the African Union, the Southern African Development Community (SADC), and East African Community (EAC). It is also an active supporter of The New Partnership for Africa's Development (NEPAD).