Thought for the day
"Historians are like deaf people who go on answering
questions that no one has asked them."
-
Leo Tolstoy (Russian,1828-1910)
Word for the day
Afflated (adj)
Having
inspiration; inspired
(Source: Dictionary.com)
Teaser for the day
Akar Patel compares Congress Party with Mogul dynasty!
Guess to whom he is being unreasonable!
Make vs. buy
At 7.4%, Chinese economy recorded its lowest rate of expansion
in 24years in the year 2014. The consensus amongst global economists appears that
the momentum may slow down further in the current year due to cooling property
market and stressed financial system. Though the government is trying, through
a series of modest stimulus measures, to maintain the economic activities
around the current levels, analysts are assigning material probability to a
hard landing in China.
Since the Chinese economy has been the most powerful engine of
demand in past two decades, the weakness there has naturally spilled into the
economies which have been feeding the Chinese demand for commodities - most
notably minerals and metals. Economies from Australia, Canada, Chile,
Venezuela, Middle East, South and East Africa to Indonesia are struggling with
stock piles of commodities and prices are crashing to levels not seen in many
years.
This is the background in which India has is reemerging from a
decade of hiatus. The incumbent government intends to initiate a manufacturing
renaissance. This would essentially need huge investments in building physical
infrastructure and rise in aggregate demand for all commodities. The demand
starved world is thus naturally exited about India - leadership, economy and
markets.
The PM Modi has struck all the right cords so far. His mantra of
3D (democracy, demography and demand) has appealed to global community. The
recent utterances of reputable global leaders, economists, policy makers, and
investors show that his charisma as "divine intervention" has
transcended beyond borders.
The Indian stock markets scaling new highs when most emerging
markets appear struggling, indicates the investors' enthusiasm towards Indian
assets.
I also share much of their enthusiasm, but with some caution. I
believe that transition from a agro economy to industrial economy will be slow
and excruciating. Expecting quick results may lead to avoidable disappointment.
Please note that:
(a) Most of the
claimed "Demand" in India is still "Need". The
"capacity to pay" that is quintessential to "Demand" is
still low.
(b) The
"Democracy" is both the strength and weakness of India in economic
context. Unlike China, it is not an easy order here to override sustainability
concerns and regional aspirations for faster economic growth. Socio-political
consideration would continue to take precedence over pure economic concerns.
(c) The
"Demography" is a still a raw strength. Without substantial
investment in "gender equality" and "skill development"
this resource cannot be exploited fully.
Another point to ponder is with China likely to ebb low for
considerable time, should we be looking at exploiting the idle capacities there
to our advantage or create redundancies here!
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