Article

India Gets to Africa’s Level

Pramit Pal Chaudhuri January 11, 2012

The Economist had done an economic map of China’s provinces showing, roughly, that their provincial GDPs were of the size of the middle-tier European countries and their per capita provincial GDPs akin to those of Latin American countries.

A similar map of India, which is initially surprising just for the size of Maharashtra’s economy compared to any other state, roughly shows state GDPs to be comparable to Latin American nations but, per capita, closer to those of African states.

This is no surprise. India’s economy is a fourth the size of China’s, but has a population almost the same size. The math is easy to work out.

When I lived in Africa, notably in Liberia during the early 1980s, I took it for granted that Africans were wealthier and definitely healthier than the Indians I saw when I returned home on holiday. If I remember correctly, Liberia had a nominal per capita GDP about double that of India in those days. Today, India has a nominal per capita GDP about four times that of Liberia (it’s even higher in PPP terms).

India, in effect, caught up with Africa because the latter saw economic growth stagnate, if not fall, during the 1980s – the continent’s “lost decade.” India experienced similar stagnation in the 1970s but never actually experienced negative growth. By the mid-1990s much of Africa was matching South Asia in terms of growth rates. Now, Africa is hard on the heels of India’s 8.5 per cent growth rate.

This doesn’t mean India and Africa can be equated. Africa should be much wealthier. It has more mineral wealth, far more arable land and a fraction of the population pressures that bedevil India.

Why the continent failed to live up to its potential can be summed up in one word: politics. The weakness of political institutions has been terrible for Africa. Libera was a perfect example. It lived on mineral wealth, imported expatriates to be its middle class, and then lapsed into civil war. So many African states underwent similar experiences of political turmoil that the continent as a whole recessed economically.

India’s rickety polity, however, ensured that its leadership may not have shone but at least didn’t cause wholesale political chaos – or at least limited it to small bits and pieces of the country. It muddled along, but that was enough to keep it from going into reverse. Curiously, India may struggle a bit to pull ahead of Africa over the next decade. The continent’s overall growth rate has actually overtaken that of Asia as a whole and the Economist has calculated that between 2011-15, seven of the ten fastest-growing economies will be African. India is number two on that list, so it should continue to inch ahead if it can at least sustain eight per cent growth during that time. Also, there is evidence that India’s total factor productivity is rising quite healthily while it remains a weak source of growth for Africa.

Over the next 10 years, if India can push its PPP per capita income to $3,500 or so, it will begun to reach the figures of Latin America today. The blog celebrating that would then be called “India reaches Latin America’s level.”