I read this article titled "Emerging markets: Trading blow" in The Financial Times last week. The article describes how a drop in Chinese demand has reduced the GDP growth in emerging market economies - Brazil, Russia, India and China. The article states that GDP growth for 2015 in the emerging markets is going to be close to 0%. This is a very significant fact because emerging markets today account for 35% of global GDP in nominal terms and 52% of global GDP in purchasing power terms. The last time emerging markets slowed down to this level was in 1999 when they accounted for 23% of global GDP in nominal terms and 35% in purchasing power terms.
Brazil recently unveiled a $35 billion infrastructure stimulus plan to support an economy which shrank in 1Q 2015. Much of the growth in the last decade was the result of heavy infrastructure spending in China, which built more high speed rail in the last 10 years than the rest of the world combined. Being the most efficient means of transportation known to man today, the strategic value of China's High Speed Rail today is priceless.
India today is at rank 44 in IMD world competitiveness rankings Amongst the other factors, infrastructure development has been stated as an important challenge for India. In light of these facts, Prime Minister Narendra Modi has been working on the Smart Cities development theme and will be announcing funding of 98000 crores for 100 smart cities and a new urban renewal mission for 500 cities. Questions have been asked whether having 100 smart cities will dilute the scope of individual projects since a single phase of the Delhi Metro (Phase 2) cost up to Rs. 19000 crores.
This project dwarfs in comparison to what China has done with its high speed rail but the steps of the government are in the right direction nonetheless. This leads to an important question - "Does a strong Rupee lead to lower costs of commodities such as iron ore and copper and thus could it lead to larger scope on infrastructure projects?" It also leads to a questions - "Can India produce a commodities boom the way China produced it for the last 10 years and build infrastructure which is at par with the developed world?" India ranks at 54 in the 2014 World Bank Logistics Performance Index Infrastructure Rankings. This ranking would be a big obstacle to PM Narendra Modi's Make in India campaign.
Brazil recently unveiled a $35 billion infrastructure stimulus plan to support an economy which shrank in 1Q 2015. Much of the growth in the last decade was the result of heavy infrastructure spending in China, which built more high speed rail in the last 10 years than the rest of the world combined. Being the most efficient means of transportation known to man today, the strategic value of China's High Speed Rail today is priceless.
India today is at rank 44 in IMD world competitiveness rankings Amongst the other factors, infrastructure development has been stated as an important challenge for India. In light of these facts, Prime Minister Narendra Modi has been working on the Smart Cities development theme and will be announcing funding of 98000 crores for 100 smart cities and a new urban renewal mission for 500 cities. Questions have been asked whether having 100 smart cities will dilute the scope of individual projects since a single phase of the Delhi Metro (Phase 2) cost up to Rs. 19000 crores.
This project dwarfs in comparison to what China has done with its high speed rail but the steps of the government are in the right direction nonetheless. This leads to an important question - "Does a strong Rupee lead to lower costs of commodities such as iron ore and copper and thus could it lead to larger scope on infrastructure projects?" It also leads to a questions - "Can India produce a commodities boom the way China produced it for the last 10 years and build infrastructure which is at par with the developed world?" India ranks at 54 in the 2014 World Bank Logistics Performance Index Infrastructure Rankings. This ranking would be a big obstacle to PM Narendra Modi's Make in India campaign.
No comments:
Post a Comment