By: Udaibir Das
The following introduction is from the paper, “India–Africa Economic Diplomacy: From Money Flows to Sustainable Balance-Sheet Resilience,” which originally appeared in the Centre for Social and Economic Progress (CSEP)’s report, “The Africa–India Blueprint for Growth”, on February 9, 2026.
India–Africa trade crossed USD 100 billion in 2024–2025, yet this milestone obscures a fundamental problem: capital inflows systematically weaken rather than strengthen African balance sheets. Twenty-three countries face debt distress not because they borrowed excessively, but because diplomatic finance bypassed the institutional mechanisms required for productive absorption, creating what this chapter terms the “Absorption Paradox”.
This chapter proposes that India possesses the institutional and experiential resources to pioneer this balance-sheet approach in Africa, transforming India–Africa economic diplomacy from a replication of traditional development finance failures into a distinct partnership model.
The core problem lies in the incentive structure of economic diplomacy. Announced agreements measure gains; politicians benefit from visible projects; lenders profit from rapid deployment. No actor bears responsibility for long-term balance-sheet consequences. This disconnect becomes particularly critical in shallow financial systems, where macrofinancial vulnerabilities, the interaction between macroeconomic shocks and financial sector fragilities, can rapidly escalate into crises. Hippolyte Fofack argues that African countries will continue to face disadvantageous terms unless the structure of development finance centred on diplomacy changes. This constitutes the “Absorption Paradox”: instruments marking diplomatic success precipitate fiscal fragility when macrofinancial institutions lag.
The chapter’s central analytical claim is this: what operates as development finance in current India–Africa partnerships is predominantly diplomatic finance, optimised for geopolitical returns and measured by announcement volumes, rather than development finance, which optimises economic transformation across decades and is measured by balance-sheet resilience. This distinction explains why capital mobilisation volumes have become inversely correlated with institutional capacity and why the current incentive structure systematically leads to absorption failures.
Udaibir Das is a Visiting Professor at the National Council of Applied Economic Research, a Senior Non-Resident Adviser at the Bank of England, a Senior Adviser of the International Forum for Sovereign Wealth Funds, and a Distinguished Fellow at the Observer Research Foundation America.