Why India matters

Two weeks from now, India will celebrate 68 years of independence from the British rule. Indeed, these are exciting times for India! Because for instance, even though very few economies were projected by the IMF to grow at rates above 6% this year, India was tipped to grow at 7.5%! The country is projected to beat China for the second year running as the fastest-growing economy in the world.

Following the peaceful change of government in 2014, firm policy actions, and sustained lower global oil prices have boosted the IMF’s outlook on India. The Indian government's push on manufacturing through the 'Make in India' initiative has been tipped as a major step which could further deepen the country’s quest for an economy which is skewed more towards manufacturing than services.

As of today, India’s GDP growth rate surpasses those of all countries that have economies of its size. And in terms of population size, it is the biggest democracy in the world, with 1.3 billion people (2013), 814.5 million of which are voters. For Nigeria, India matters for a number of reasons: Both countries are intertwined in trade, investment, and colonial heritage. (Clearly, the proliferation of Indian businesses in Nigeria and their success is a story worth telling). 

Nigeria also has a lot of economic and political lessons to learn from India. A long success story In a report published a few years ago by BusinessDay’s Research and Intelligence Unit (BRIU), it was stated that “taken together, Indian businesses in Nigeria are the highest employers of labour, apart from the federal government.” There is almost no sector of the Nigerian economy where Indians have not invested.

 Their interests cut across commerce, financial services, industry, agriculture and consulting. The value of trade between Nigeria and India has risen consistently in the last two decades; it was put at $17 billion between April 2013 and March 2014. At present, India is the single highest consumer of Nigerian hydrocarbon and is the preferred destination for medical tourists of Nigerian extraction.

BRIU’s health sector report lists the services Nigerians seek in India and indicates that “the cost of such services runs into about $260 million annually.” But apart from healing Nigerians through offshore medical services, Indians have invested in the local pharmaceutical industry and make available drugs at competitive rates to millions of Nigerians. 

India’s historic reform 

A number of economists trace India’s success to the reforms the country adopted in the early 1990s. The reforms began with an address of then finance minister Manmohan Singh to parliament.

Mr. Singh’s proposition which was based on the dare economic realities at the time, made it inevitable for the country to devalued the rupee, abolished most of the quotas and licenses that dictated who could produce what, and opened several industries to foreign capital. Those reforms also improved the business environment dramatically and engendered growth.

Some visible products of the reforms are: the immense changes which have taken place in the IT, pharmaceuticals and other health care sectors in the country. Today, India is the seventh-largest economy in the world by nominal GDP. Its economy has successfully diversified and commands respect in sectors including agriculture, industry, pharmaceuticals, engineering, textile, mining, services, energy and power, IT and retail. Interestingly, services contribute 64.8% of India’s GDP while agric and industry contributes 13.7% and 21.5% respectively (Based on 2013 government data).

The government of Prime Minister Nerenda Mordi has taken it as a cardinal objective to further skew the economy towards manufacturing by implementing a major new national program: Make in India. Make in India is designed to facilitate investment, foster innovation, enhance skill development, protect intellectual property and build best-in-class manufacturing infrastructure. India currently ranks the Number one investment destination in the world as per the 2015 Baseline Profitability Index (BPI) whether or not this is the product of the Make in India policy is a debate for another day.  

Lessons for Nigeria 

A major difference between India and Nigeria is the series of bitter reforms and sacrifice the country subjected itself to in the last two decades. Its current status is a product of toil and sweat, not lip service. To build a more advanced nation, Nigeria must learn to take the bitter pill of sacrifice just as India continues to do (Not that Nigerians have not had a lot of these pills already). 

Inefficient subsidies must be abolished and funds garnered from the process wisely invested in infrastructure, education and health care (to an extent, this was done by the last federal administration). Then again comes the issues of the business environment: Nigeria currently ranks 170 out of 189 countries in the global Ease of Doing Business Index. Though on the overall scale, Nigeria inched five steps upward from 175 to 170 between 2014 and 2015, yet the country still sank on five key indicators.

 Nigeria recorded decline in Dealing with Construction Permits, Getting Electricity, Protecting Minority Investors, Paying Taxes, Enforcing Contracts, and Resolving Insolvency, all of which are basic to attracting investment. India on the other hand ranks 142 on the index (though it dropped two steps, from 140 in 2014, it is still significantly ahead of Nigeria).        

Another major difference between Nigeria and India is patriotism. While Indians call their country “Mother India,” it is debatable that most Nigerians exalt their pockets above national interests. Of course corruption remains a problem in India, but known corrupt government officials are not venerated in that country.   

The future of both Nigeria and India are bright. For sure both countries have the numbers that make them worthy of being called consumer economies. This in itself is an advantage. As both countries continue on different growth trajectory, there are immense lessons they can learn from each other. And there are immense trade benefits which they both stand to enjoy from each other.   

Ejiro is a Senior Research Analyst with BusinessDay’s Research and Intelligence Unit