Posted in Finance Articles, Total Reads: 624
, Published on 28 November 2015
India and Africa have had a rich share of history dating back to hundreds of years. The first bilateral trade between the two dates back to 100 BCE when Roman Egyptians crossed the Red and Arabian Sea to reach to southern India. Even the African culture seems to be influenced by that of India’s which is visible in their works of fabrics, silver, ivory, etc. Apart from the trade, Indians also were influential in Africa’s political territory where M.K Gandhi (Mahatma Gandhi) led a movement against racism of black Africans and he was soon proclaimed as a national hero among the citizens. However decades gone, India is still developing and Africa is underdeveloped and both are still coping with a host of problems: some common; some specific.
Firstly, the most deepening problem for both of them is Poverty. It has been estimated that about 30% of India’s population and more than 45% of Africa’s population is below poverty line. That sums up to be a staggering 900 million of population below poverty line combined. This comes out to be almost 60-70% of world poverty. Another deepening problem that is in a way interlinked with poverty is illiteracy. It is estimated that an astonishing 50% of African youth is still illiterate and in India though urban literacy is on a rise, one in three children is still illiterate in Urban India. They have little or no skills and hence are deprived of employment and not able to lead a sufficient economic and social life. This leads to poverty of many such individuals at the micro level and the country’s economy enters a tailspin and is impacted at the macro level. However, this is just a part of the story.
India is currently growing at around 7-7.5%; one of the fastest in the world and Africa as well was growing at 5.6% in 2013, the fastest growing continent in the world. Few of the top nations in Africa such as Angola grew at 17.6% and Sudan at 9.6 in 2007. India is on the cusp of revival with many reforms such as Make in India and Janadhan yojana being launched in recent times. Also another few reforms such as the one including GST bill that would be a breakthrough in simplifying the tax structure and subsuming all the underlying taxes into one would lead to a definite path breaking progress of the country. And for Africa, according to the World Bank, if current trends continue, most African countries will have reached middle-income status by 2025. But with global demand slumping, China on a slowdown, US still grappling with an attempt to reduce unemployment and increasing inflation and Euro zone in Crisis is the picture for an enriching Indian and African economy a rosier one?
So what is the difference that one can make out from the above two contrasting themes in the same country? It is the widening inequality between the rich and the poor amongst the societies. It is till that extent that people are unable to support themselves with basic nutrition and hygiene and people die of Malaria, TB, etc for which there is 100% cure available but it is not reaching to them yet and they are not able to afford it. Consider Malawi, a small African country for example, where people come to Medical ward to die of Aids – a shocking Euphemism. Cipla, an Indian based pharma major, had signed a contract with the Malawi government to treat the patients with their Antiretroviral generic drug at 1$ a day. But neither the government nor the people infected with HIV could afford to spend and after a ridiculous struggle to get funding from international agencies, the Malawi government received the funding to save just twenty-five thousand out of a mammoth nine hundred thousand – a painful plight to visualize. This is just an example. In India as well, people are deprived of basic sanitation, hygiene and nutrition which they have a definite right to. Although over the years, the situation is looking improving but yet a many are deprived of it.
These hospital and medical facilities are not available and these makes even the most curable diseases being the reason to cause deaths which is pretty appalling. In India, as well, many farmers in Vidarbha and other parts of Maharashtra have committed suicide, due to debt burdens as low as few thousands. As a global society, we need to give that one sixth of humanity a chance to climb on the development ladder and put their first foothold after which they can find their way upwards. On other hand, however, it seems highly prudent to ask the rich countries to help the poorest of poor to escape from the poverty trap. But this task can be achieved with an already committed 0.7% of GNP by the rich world. A mere 7 cents out of 10$ which is such a small fraction considering the rich world has been so vastly rich today.
Mathematically speaking, according to World Bank’s estimates, $1.25 a day is sufficient to avert extreme poverty. The 900 million of combined population in India and Africa lives at an average income of around $0.8 falling short by $0.45 per day or $164 per year. This multiplied with 900 million amounts to $150 billion and the income of US alone in the twenty-eight donor communities of the Development assistance committee (DAC) is about 17 trillion dollars. But will a financial assistance only is a solution to eradicate poverty? The answer is No.
Economic, like individuals, are complex systems. Just like Circulatory, respiratory, metabolism has to work in unison for the overall better health of an individual; in Economics Roads, transport, power, fiscal health, trade barriers, productivity etc have to work in tandem to overall improve the economy. To start with a few factors to improve and avert the extreme poverty situation and help achieve the basic needs:
• Agricultural productivity: It is of an essential purpose to reduce the dependence on land for agricultural purpose and pave way for creation of Industrial and residential purpose to support the burgeoning population. Now, it is a futile way, if agricultural production would have to reduce to lower levels and not supporting the population and possible exports to compensate. Thus, it is of prime importance to improve the agricultural productivity reducing the dependence on agriculture and agricultural land. However, the cereal yield in India, is around 3000 kg per hectare which is almost half as that of China and far lower than international standards. A proper irrigation facility, use of fertilizers and pesticides and increasing awareness amongst the farmers about new technological innovations to improve their produce is the Government’s prerogative.
• Healthcare facilities: Africa had been amidst a series of epidemics ranging from Malaria, TB, HIV Aids and now Ebola. It is of a crucial significance to improve the medical and healthcare infrastructure in the continent. The number of people dying has a cascading effect ultimately leading to poverty and degrading the economy. As more and more people die of these diseases, many teachers, farmers, doctors, students are lost and the parents, hence, usually tend to have more number of children. Being poor, they can educate only one child, usually the elder one and many children remain uneducated and illiteracy opens up another can of worms.
• Ease of doing Business: India ranks 142 amongst 189 countries and the rest of the bottom ranks are filled by the African countries in Ease of Doing Business. This is an utmost serious problem not withstanding to create a conducive investment cycle and causing the economy to be not pro-growth. Another problem is that Africa is a continent with many landlocked countries. Due to this, they are deprived of cheaper water transport and suffer from lower amounts of trade. It is of a pre-requisite to create a supportive infrastructure conducive to industrial growth that will provide more jobs and improve the overall health of the economy.
• Removing trade barriers: UN has also launched a Special dedicated plan towards removing trade barriers in Africa. It is seen that only 12% of total trade is intra-Africa in compared to 60% in Europe and 30% in ASEAN, according to WTO. This cross border trade would pave way for economic development for many countries, enable food security and help to improve GDP by 1-2 percentage points.
•Improved trade between India and Africa: India and Africa are trade partners since long with the bilateral trade amounting to $80 billion in 2013. But still, this can be improved and enhanced further. Indian pharma companies can set up industries in Africa with some subsidies from the African government and this lower cost can in turn be used to lower the cost of products and improve the healthcare infrastructure in different parts of Africa. Africa, in turn, can provide trades of Minerals and precious metals which forms a major part of Indian imports.
Corruption: Corruption remains a deep rooted malaise for the entire world but specially in India and Africa, the poor has to bear the brunt. The money that is supposed to flow to the poor are not reached and this makes the welfare and devlopment programs painfully futile. The Governments need to bring in transparency, take stricter actions against the offenders and ensure that the funds do reach the poor.
Thus, it is an important requirement for Governments of the India and Africa to take active steps, create a stable global environment and make the people to get atleast on the first step of the ladder where the difference between the rung and the first step is huge. Apart from these steps, it is important to improve the people’s outlook towards the poor,reduce corruption and ensure the funds reach the poor and it’s the entire World’s prerogative to take a stance to reduce poverty. The Indian-African relation also need to take their bilateral trades to newer levels focussing on urbanization, infrastructure related investments, providing resources, Oil and minerals (by Africa) and Healthcare, silk and fabrics (by India). Thus, a continued support by both would eventually help us to see a new future- a brighter one, one where the economy is developing and on the side each and every people is looking to evolve, develop and contribute towards itself and lead a sustainable life."
This article has been authored by Bhagyesh Shah from SIMSREE
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