India-Seychelles Economic and Commerical Relations

General Trend of Trade with India

Trade between India and Seychelles has shown a marked decline from the estimated 3.5 per cent during the year 2000 to 1.4 per cent during 2001 and 2% in 2002. When viewed against the overall decline in Seychelles trade by 27%, there is only a marginal decline of trade with India in 2002 compared to the earlier highest figure of 3.5%. The figure got a boost (around 4%) on account of partial utilization of the EXIM Line of Credit for imports of TATA and Ashok Leyland buses in 2003.

Important Features of Trade with India

In 1978, Tata Exports helped set up the Seychelles Public Transport Corporation (SPTC) by providing 80 buses on commercial terms. In the year 2000, 34 TATA buses with spares were imported under a US$ 2 million Line Of Credit advanced by the Govt. of India. With a further US$ 5 million EXIM line of credit nearly 60 TATA and Ashok Leyland buses were added in 2003. This gave a boost the overall share of trade with India to around 4% in the year 2003. The only major investment from India is by the Bharti Telecom group who, along with partners from Mauritius, U.K. and Seychelles, have invested over $25 million to provide a second line of telecom services in the country in competition with Cable & Wireless (Seychelles). The company has recently acquired a hotel (Le Meridien Barbarons) and renovating it as a 5-star resort to get advantages of forex repatriation. The Bank of Baroda has been maintaining a branch in Seychelles since 1978 and has also been extending loans and credit lines to the Govt and Seychelles Marketing Board (SMB). The major items of import by the Govt. are through the SMB, which imports rice, onions, potatoes and soyabeans, and of late pharma products, machinery, construction material etc. from India.

Factors affecting Exports to Seychelles

The imports are a reflection of the policy of discrimination against private traders at the cost of the Seychelles Marketing Board (SMB). The Govt. has enacted stringent regulations, forcing the private sector to virtually abandon direct trade with countries like India, with restrictions on issue of forex, opening of LCs or granting of import licenses. The desperation of the Seychelles Chamber of Commerce and Industry had reached such a low that a FICCI delegation's visit to Seychelles in December 2001 had to be held in abeyance as the situation on the ground was not appropriate for the visit. The visit is still to take place. A meeting of the Jt. Trade Committee scheduled for Dec'03 had to be cancelled for the very same reason. Payment for imports made prior to June 2001 remains frozen, leading to virtual halt in trading by Indian exporters with Seychelles with nearly US$ 700,000 of export proceeds lying blocked with commercial banks from 1998 onwards. Trade is yet to pick up with India despite better connectivity than before both by air and sea. A regular shipping service is available between Mumbai and Mahe. Air Seychelles put an additional weekly flight to Mumbai from end Oct'03, thus 2 weekly flights between Seychelles and India have augmented passenger traffic and could boost tourism and trade prospects from India.

There is potential for export in areas such as food items, construction materials, drugs and pharmaceuticals, Ayurveda products, consumer durables, textiles, automobiles etc. There is no export from Seychelles to India. The initial idea of making Seychelles a regional hub has since dissipated and with lack of proper guidelines on foreign investment there has been no worthwhile investment in the country except in the tourism sector. Negotiation on BIPPA have been protracted and the government has vaccillated the fostering transparency in promoting and protecting foreign investments.

Measures taken to improve trade

Concerted efforts have been made by the mission in facilitating visits of the EXIM Bank representative and Project Director, NSIC from Johannesburg. The Mission also disseminates trade related information to concerned parties in India and Seychelles on a regular basis. The Indo-Seychelles Joint Commission has had six sessions so far, the last one was held in Mahe in October 2002. Issues concerning bilateral trade and investment were highlighted in the 6th JCM. Director, GOITO, Johannesburg visited Seychelles in Feb'03 to explore possibility of tourism from Seychelles to India. GOITO's efforts supported by the Mission have seen a steady increase in tourist traffic from Seychelles to India with two weekly connections to Mumbai.

Future prospects

The country is under immense pressure to pursue discussions with IMF and World Bank to tide over its economic difficulties and has come out with a macro economic reform package with effect from 1st July 2003 to bring about structural reforms though nothing much seem to have happened except imposition of a 12% GST (Goods and Services Tax) which has sent prices spiraling across the board making Seychelles the most expensive country in the region.

India will stand to gain from a liberalized economy, on three counts (i) the bulk of private traders are Indians and have trading link with their places of origin (ii) Indian goods are cheap and compatible - some Indian products have made inroads into Seychelles through Singapore and Mauritius and (iii) Seychelles proximity to India and the availability of air and shipping links.

Once the private sector gets energized, they will seek cheaper imports on which Indian goods have a competitive edge. India as a cheap market for trade and tourism is gaining ground and a growing number of Seychellois are visiting India for tourism, training and of late medical treatment.

Source: Indian High Commission, Seychelles