Thursday, February 25, 2010

India Rising - Three Stalwarts' Views

The hype about the emerging economies, especially India and China, has picked up momentum in the recent past. But, this is not something new and probably have been happening for the past 25 years. The rise of the Indian middle class, the growth in per-capita income, literacy rates and slowdown of population growth rate are the few indicators of the Indian growth story. At our Alliance campus I had the privilege of interacting closely with three stalwarts in a span of roughly one month on this topic.

Dr. Jagdish N. Sheth, a renowned scholar and world authority in the field of marketing, was here on January 17. He was sharing his insights on global competition, strategic thinking and customer relationship management. He strongly believes that while the 20th century economics was driven by government policy of advanced economies, the 21st century economics will be driven by competitive markets of emerging nations. To his opinion this would be primarily achieved through 100% education, gender neutrality, and open to change. He says that the factors attributable for India's growth are:
- Change in the economic policies
- More advanced nations are ageing and ageing rapidly
- Economic pragmatism
To my opinion the public sector enterprises will play a major role since they already have the scale and just needs reforms and better governance.

I had a question for Zarir J. Cama, Deputy Chairman & CEO, HSBC Bank, Malaysia when he recently visited our business school on February 19. I asked him that can U.K or U.S.A continue to consume goods and services that are manufactured in the emerging economies without having the corresponding growth in earning capacity? He said that an economy like U.K. cannot continue with a deficit of 180% of its GDP very long, and the similar logic is applicable for the U.S. On the other hand the emerging nations like India and China cannot solely rely on the advanced economies for the market of their products and services; they will also have to start consuming their own produces. Referring to the recent financial crisis he opined that it is now clear that Asian banks are emerging stronger and more resilient from the crisis than the most. However, as Asia's economies and businesses grow, they will demand deeper and more sophisticated capital markets to ensure the efficient allocation of capital.

During my one-to-one interaction with Mr. V. Ravi Kumar, Executive Director, Bangalore Stock Exchange at our campus, on February 23, I had asked him "will the divergent growth rates in the U.S. and China finally erode the hegemony of the U.S. dollar?". In reply to my question he made a very candid remark - "all said and done don't forget that the U.S. is still the elephant in the room and will continue to be the same for years to come".

Though we cannot undermine the upward growth of the emerging nations and possibilities and outcomes of a trilateral relationship between the U.S., India, and China still there is a long way to go. We are excited about China's over 10% growth for the past 10 years but, are we sure that this growth rate is sustainable? In India only financial and monetary reforms cannot shape our future, the next reform we need is inevitably reforms in governance.

1 comment:

vishal said...

hmmm one of the seminar( hsbc one) I also attended...
If posible on this forum I would like to know ur views on following...
as we continuously keep on hearing various bubbles in the various economies like china etc. now n then. A term that has become too common is sovereign debt default risk.
now if we talk in Indian context what v r witnessing is huge consumption-investment in infra based growth stimulus by the GOI. For which it is part funding by means of huge borrowing program. what u feel can it lead india to the same situ as other economies r currently?? wouldn't it lead to bubble in Indian economy....moreover cz of huge debt on books of Indian govt. the debt servicing would in turn put pressure on fiscal front.