Monday, December 30, 2019

Will African countries overtake India economically?

"...According to the International Labor Organisation (ILO), African countries had some of the lowest unemployment rates in 2018," wrote Celestin Monga. "The reality in these countries, however, is that almost everyone must have work to survive because governments have limited capacity and no fiscal space to support social security nets." On the other hand, there is no shortage of welfare schemes in India, to which Prime Minister Narendra Modi has added a long list of his own. "Economists complained about the BJP not merely continuing the Congress' welfare schemes like Mahatma Gandhi National Rural Employment Guarantee Act, the right to food and the right to education, but actually increasing the number of schemes, budgetary allocations and the importance the government was giving them..."wrote Prof Ila Patnaik. But, Modi won election by distributing something to the poor through "various pradhan mantri schemes". The UN expects Africa's "working age population (those aged 15 to 64) to double to 1.5 billion by 2050". India already has a population of over 1.3 billion, of which over 730 million are between the age of 15 and 64 years. The unemployment rate fell to 7.48% in November from 8.45% in October but the labor force participation rate also fell to 42.37% which means millions have stopped looking for work. Ominously, at 13.2%, unemployment was highest among graduates and above, while it was lowest among the illiterate. With so many unemployed and under-employed (those who find work for less than 30 hours per week), "employment has remained overwhelmingly informal" in Africa. Over 50% of Indians are self employed. "Our massive self-employment is not some over-weight entrepreneurial gene among Indians; the poor cannot afford to be unemployed so they are self-employed," wrote Manish Sabharwal. India has 63 million enterprises while the world's largest economy the US has 22 million. "African governments often tried to replicate the capital-and technology-intensive industries of high-income countries." It is misguided, which is why many African countries "commodity dependent and job-scarce". In India, "More than 80% of employment is generated by small enterprises in the unorganized sector," wrote Ejaz Ghani. "Small entrepreneurs are important to India's jobs, structural transformation, gender equality, and inclusive growth." Modi wants to formalize the economy because he wants to collect more tax so he resorted to demonetization which decimated the unorganized sector, wrote Andy Mukherjee. India has lost the opportunity to grow its economy at faster rates. Just 8 out of 200 economies are on track to grow at 7% this year and most of these are small economies in Africa, wrote Ruchir Sharma. "For emerging nations, such as India, 5% is the new 7%, the appropriate aspirational standard." Africa could overtake India. Probably will. 

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