• Sunday, May 19, 2024
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BusinessDay

Five lessons for Nigeria as Indians’ wealth surge fivefold

Impending deal by India, Nigeria for local currency settlement could ease FX crisis

The wealth of India, which overtook China as the world’s most populous country last year, jumped more than fivefold in 20 years, BusinessDay analysis of data shows.

India’s push to increase the wealth of its citizens offers lessons for Africa’s most populous nation, where 133 million people are living in multidimensional poverty.

According to the World Bank, India’s GDP per capita rose by 414.1 percent to $2,411 in 2022 from $469 in 2002. That compares with Nigeria’s, which grew by 195 percent from $733.

Despite Nigeria’s economy expanding from $4.1 billion in 1960 to $477 billion in 2022, there was a 32 percent decline in its GDP per capita between 2014 and 2022, as per World Bank data.

India, which is also a developing country like Nigeria, is expected to become a $30-trillion economy in the next 26 years with a per capita income of $21,000

The Indian economy is currently the world’s fifth largest, with a size of $3.75 trillion, and is expected to become the third largest in the next four years.

“If this kind of pace continues for some years, it will make India a $30-trillion economy by 2045-50 with per capita income of $21,000 pushed by robust consumption and exports,” Atanu Chakraborty, chairperson of HDFC Bank, India’s largest lender by market capitalisation, said last October.

Persistent sluggishness plagues Africa’s largest economy, according to a report by Deloitte citing factors like poor policy execution, heavy reliance on oil revenues, infrastructure deficits, security challenges and mounting debt.

Deloitte said Nigeria’s GDP per capita fell below the global average, necessitating a 25.6 percent annual growth rate to catch up within eight years.

“With GDP per capita currently at $2,187, Nigeria is significantly below the prescribed threshold. For Nigeria to reach the current world average, its GDP per capita will need to grow at an exponential rate of 25.6 percent per annum within eight years,” it said.

Apart from wealth, India has witnessed a foreign direct investment (FDI) surge to $49.4 billion in 2022, a leap from $3.59 billion in 2000, while Nigeria’s FDI turned negative (-$187 million) from N1.31 billion 22 years ago, according to United Nations Conference on Trade and Development.

“Facing a severe balance of payments crisis in 1991, the Indian economy liberalised with a slew of economic reforms aimed at reducing import tariffs and ‘opening up’ sectors to foreign investment,” analysts at Visual Capitalist said in a report.

They said FDI in the Asian country trended upward, gathering steam at the start of the new century.

“In the midst of the subprime crisis and the global recession, investment to the country stayed resilient due to the country’s vast, and fairly insulated, domestic market,” the report said.

India ranked 40th on the 2023 Global Competitiveness Index 2023. The country also jumped by six places to 38th in the World Bank’s 2023 Logistics Performance. In terms of innovation, it ranks 40th.

India ranked 132nd in the 2021/2022 Human Development Report, as against Nigeria’s 163rd position.

Here are lessons Nigeria can learn from India’s GDP per capita growth

Focus on IT and services

India embraced the IT revolution, becoming a global hub for software development and outsourcing. This sector fuelled job creation and attracted foreign investment.

Education and skills

India prioritised education and skills training, creating a workforce equipped for the knowledge economy. Nigeria needs to invest in education and vocational training to create a competitive workforce.

Stable economic growth

India’s population grew by 7.2 percent to over 1.3 billion in 2022. It is one of the world’s fastest-growing economies, lifting about 415 million people out of poverty between 2005 and 2021.

Shri Narendra Modi, prime minister of India in May 2020, announced a special economic and comprehensive package of more than $270 billion – equivalent to 10 percent of India’s GDP, under the Atmanirbhar Bharat Abhiyan (Self-reliant India Campaign).

Targeted reforms

India’s per capita income is likely to grow by nearly 70 percent to $ 4,000 by 2030 from $2,450 in fiscal 2023, helping it become a middle-income economy with $ 6 trillion in GDP, according to a report from Standard Chartered Bank.

According to the report, the primary growth driver will be external trade, which may nearly double to $ 2.1 trillion by 2030 from $ 1.2 trillion in 2023, when the GDP reached $3.5 trillion.

The second biggest growth driver will be household consumption, which is seen jumping to $3.4 trillion by 2030, as big as the current GDP size, from $ 2.1 trillion in fiscal 2023. Household consumption is as much as 57 percent of GDP now.

Self-reliance on its manufacturing product

A report by The Economist noted that developing countries like India built their industries behind protectionist walls, which restricted imports, then thrived when trade with the rest of the world was encouraged.

In 2015, India announced plans to increase the industry’s share of the Indian GDP to 25 percent, from 16 percent. “Sell anywhere, but make it in India,” Narendra Modi, India’s prime minister, said.

The report noted that India aims to surpass the World Bank’s high-income threshold.