PM Modi’s historic Ethiopia visit: What's the size of African nation's economy and how it compares to India

At a time when the world is moving towards a new economic order fueled by geopolitical and tariff tensions, India is forging a new path with relatively new partners. In this backdrop, Prime Minister Narendra Modi's three-nation trip to Jordan, Ethiopia and Oman gains significance. When PM Modi lands in Addis Ababa, all eyes will be on the kind of deals New Delhi signs with this critical African partner.

Located in the Horn of Africa, Ethiopia serves as a gateway to Europe, Asia and Africa. The numbers, however, show a stark contrast between the two economies. As per the latest data, while India is the fifth-largest economy in the world, Ethiopia is far below, ranked 62nd globally. Within the African continent, Ethiopia is the fastest-growing economy, driven largely by a young population.

India ranks fifth globally by economic size, propelled by services and manufacturing, while Ethiopia occupies the 62nd position amid its reliance on agriculture and ongoing economic reforms.

World Economics projects Ethiopia's purchasing power parity (PPP) GDP at $620 billion for 2025, significantly higher than its nominal GDP of $127-174 billion, but still dwarfed by India's estimated $21.85 trillion PPP share of global output. While PPP adjustments highlight Ethiopia's undervalued output due to lower costs, India's economic scale remains dominant.

In the evening, PM Modi will hold bilateral discussions with his Ethiopian counterpart Abiy Ahmed Ali. This is the second time the two leaders are meeting in less than a month. The two world leaders had held discussions on the sidelines of the Johannesburg G20 Summit in South Africa last month.

India-Ethiopia relations are rooted in history and can be traced back to the Axumite Empire in the 1st century CE, when vibrant trade links connected the two regions. Indian traders exchanged silk and spices for Ethiopian gold and ivory, laying the foundation for enduring commercial ties.

After India gained independence, Ethiopia became the first African nation to open a diplomatic mission in New Delhi in 1948. Since then, bilateral engagement has steadily expanded, encompassing development cooperation, trade and investment, education, capacity building, and defence collaboration.

Today, India is Ethiopia's second-largest trading partner and a key source of foreign direct investment. More than 650 Indian companies operate in Ethiopia, collectively emerging as the country's largest private-sector employers.

Bilateral trade stood at around US$ 550 million in 2024-25, with India exporting primarily pharmaceuticals while importing pulses and seeds. The Prime Minister's visit is expected to identify new areas of economic engagement and provide fresh momentum to bilateral trade and investment ties.