Four major emerging realities in the context of emerging economies are
1. Global Demand Patterns:
Global demand pattern are gradually shifting towards the emerging economies.
As early as 2009, the annual increase in US dollar spending from the Emerging economies could be greater than that from the G6 and more than twice as much in dollar terms as it is now. By 2025 the annual increase in US dollar spending from the BRICs could be twice that of the G6, and four times higher by 2050.
Fig1: Incremental Demand
For instance if we consider Agricultural products-Russia, China are among top agricultural importers:
§ Russia is the world.s third largest importer of agricultural commodities, particularly poultry,
dairy, and fruits and vegetables. With just 2% of the world.s population, Russia consumes
close to 20% of the world’s poultry.
§ China also ranks among the top ten importers of agricultural commodities. It remains the
largest importer of cotton. China is expected to become the largest importer of oil seed meals and consolidate its position in imports of oils and oilseed as biofuel production expands.
Fig2: IMPORT DATA of Agricultural Commodities
Rising incomes may also see these economies move through the ‘sweet spot’ of growth for
different kinds of products, as local spending patterns change. This could be an important
determinant of demand and pricing patterns for a range of commodities.
2. Flow of world financial assets:
Higher growth may lead to higher returns and increased demand for capital in emerging market and for the means to finance it. The weight of the emerging economies in investment portfolios could rise sharply. The pattern of capital flows might move further in their favor and major currency realignments would take place. More of the funds are now moving into equities, showing that such investments are becoming more long term in their orientation. In 1990, 67% of emerging country assets were bank deposits and government bonds; today, that ratio has dropped to 55%.This reflects changes in the relative size of the economies. Emerging markets have been growing much faster than the developed economies. Thus, their share of world GDP has risen.
Fig3: FDI Inflow
3. Decoupling of the emerging economies from the Industrialized countries:
We see that emerging economies are slowly decoupling themselves the developed world. This is very stark in Asia. With three out of the four largest economies in 2050 potentially residing in Asia, we could see important geopolitical shifts towards the Asian region. China’s growth is already having a significant impact on the opportunities for the rest of Asia. Sustained strong growth in the other BRICs economies might have similar impacts on their major trading partners.
Fig4: Share of Emerging Market’s Trade
Though emerging economies are not yet fully decoupled from the developed economies but we can see from the graph above, an increase in the trade between the emerging countries and a decrease in their dependency on the developed world. Hence these economies will progressively be shielded from the economic recessions in the developed world.
4. Significance for today’s global companies:
As the advanced economies become a shrinking part of the world economy, the accompanying shifts in spending could provide significant opportunities for many of today’s global companies. Being invested in and involved in the right markets—and particularly the right emerging markets—may become an increasingly important strategic choice for many firms. The list of the world’s ten largest economies may look quite different in fifty years time. The largest economies in the world (by GDP) may also no longer be the richest (by income per capita) making strategic choices for firms more complex.
China Vs India: Which one will be the fastest growing economy?
Among the Emerging countries, China is expected to be the fastest growing country till around 2020. China’s growth rate is expected to fall to 5% in 2020. By 2050, China is expected to slow down to 3.5 %. India on the other hand is expected to be growing at rates above 5% till 2050.
Table1
Three major factors which favor India’s strong growth expectation are:
1) Working age population:
The growth in the labor force is one of the significant factors that would fuel India’s growth in the long term.
2) Growth in investment ratio
India’s Investment ratio is expected to overtake that of all the other BRIC countries by 2020.
Refer the bar charts below:
3) Rise of human capital in India:
Human capital is expected to rise in India faster than any other country including China. This will have a significant effect on growth.
Conclusion:
In conclusion, most indicators show that India would emerge as the world’s fastest growing country in the long term.
1. Global Demand Patterns:
Global demand pattern are gradually shifting towards the emerging economies.
As early as 2009, the annual increase in US dollar spending from the Emerging economies could be greater than that from the G6 and more than twice as much in dollar terms as it is now. By 2025 the annual increase in US dollar spending from the BRICs could be twice that of the G6, and four times higher by 2050.
Fig1: Incremental Demand
For instance if we consider Agricultural products-Russia, China are among top agricultural importers:
§ Russia is the world.s third largest importer of agricultural commodities, particularly poultry,
dairy, and fruits and vegetables. With just 2% of the world.s population, Russia consumes
close to 20% of the world’s poultry.
§ China also ranks among the top ten importers of agricultural commodities. It remains the
largest importer of cotton. China is expected to become the largest importer of oil seed meals and consolidate its position in imports of oils and oilseed as biofuel production expands.
Fig2: IMPORT DATA of Agricultural Commodities
Rising incomes may also see these economies move through the ‘sweet spot’ of growth for
different kinds of products, as local spending patterns change. This could be an important
determinant of demand and pricing patterns for a range of commodities.
2. Flow of world financial assets:
Higher growth may lead to higher returns and increased demand for capital in emerging market and for the means to finance it. The weight of the emerging economies in investment portfolios could rise sharply. The pattern of capital flows might move further in their favor and major currency realignments would take place. More of the funds are now moving into equities, showing that such investments are becoming more long term in their orientation. In 1990, 67% of emerging country assets were bank deposits and government bonds; today, that ratio has dropped to 55%.This reflects changes in the relative size of the economies. Emerging markets have been growing much faster than the developed economies. Thus, their share of world GDP has risen.
Fig3: FDI Inflow
3. Decoupling of the emerging economies from the Industrialized countries:
We see that emerging economies are slowly decoupling themselves the developed world. This is very stark in Asia. With three out of the four largest economies in 2050 potentially residing in Asia, we could see important geopolitical shifts towards the Asian region. China’s growth is already having a significant impact on the opportunities for the rest of Asia. Sustained strong growth in the other BRICs economies might have similar impacts on their major trading partners.
Fig4: Share of Emerging Market’s Trade
Though emerging economies are not yet fully decoupled from the developed economies but we can see from the graph above, an increase in the trade between the emerging countries and a decrease in their dependency on the developed world. Hence these economies will progressively be shielded from the economic recessions in the developed world.
4. Significance for today’s global companies:
As the advanced economies become a shrinking part of the world economy, the accompanying shifts in spending could provide significant opportunities for many of today’s global companies. Being invested in and involved in the right markets—and particularly the right emerging markets—may become an increasingly important strategic choice for many firms. The list of the world’s ten largest economies may look quite different in fifty years time. The largest economies in the world (by GDP) may also no longer be the richest (by income per capita) making strategic choices for firms more complex.
China Vs India: Which one will be the fastest growing economy?
Among the Emerging countries, China is expected to be the fastest growing country till around 2020. China’s growth rate is expected to fall to 5% in 2020. By 2050, China is expected to slow down to 3.5 %. India on the other hand is expected to be growing at rates above 5% till 2050.
Table1
Three major factors which favor India’s strong growth expectation are:
1) Working age population:
The growth in the labor force is one of the significant factors that would fuel India’s growth in the long term.
2) Growth in investment ratioIndia’s Investment ratio is expected to overtake that of all the other BRIC countries by 2020.
Refer the bar charts below:
3) Rise of human capital in India:Human capital is expected to rise in India faster than any other country including China. This will have a significant effect on growth.
Conclusion:
In conclusion, most indicators show that India would emerge as the world’s fastest growing country in the long term.
3 comments:
NICE TO SEE THAT INDIA INDIA WILL BE AHEAD CHINA IN TERMS OF ECONOMIC GROWTH IN FUTURE..
I THINK YOUR STUDY WAS SEEN BY THE U.S, THAT IS WHY THEY WAITED FOR INDIA TO SIGN THE NUCLEAR DEAL.
US tie with India was inevitable since US needs a partner in the growing Asian continent..or the East as they say!
India is a strategic tool for US in its diplomatic efforts. Wish Indian governments will know to utilize this effectively in the future to come!
I do not doubt the skill of our folks. But I am just worried about the political instabilities in our country:-)
As i see its the finanasial market stability which determines the growth in a long run. If we allow this foreign money to come in at 2x & get out at 8 0r 10 x after immediate return due to speculation we can not expect the growth we are aiming at. we have still a lot to improve in terms of generating the financial sytructuer as per the need of the country in terms of regulatory steps as well as monitoring policy.
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