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India: The Stand-Out Emerging Market
Will India surpass China to become the strongest emerging market? It does not seem likely considering China’s large leading margin, but there are several signs that make it seem like a real possibility over the next several years. In a global survey of the Agility Emerging Market Logistics index, of more than 1,100 logistics and supply chain experts, they reported India, not China, as the emerging market with the most growth potential. This is the first time China was not number one in the seven year history of this index. China’s GDP reached a 25-year low in 2015 at 6.9% and is slowing in industrial sectors, which is sending shock waves across global markets.
India’s remaining BRIC cohorts are also faltering. BRIC is the acronym for major emerging national economies, first coined by Jim O’Neill, then Chief Economist of Goldman Sachs in 2001, that were expected to grow faster than developed counties and play an increasingly important role in the world. Brazil is in its deepest recession in 25 years and battling surging inflation. Russia is hobbled by sanctions and plunging crude oil prices, which are at a 12 year low. Lastly, South Africa, a formerly strong developing economy joined BRICS, by adding an uppercase “S” to the end of the acronym in 2010 is now seeing minuscule growth.
So, what makes India’s economy stand out of the BRICS cohort? One factor is their low dependence on exports, which have shielded them from the vulnerability of the global slowdown. Additionally, India is a net commodity importer and significant consumer of energy. They are benefitting from low global commodity prices, including crude and natural gas. Lastly, Prime Minister Narendra Modi’s economic reforms are beginning to take shape. He has built broad support for reforms to improve the country’s business climate by cutting overlapping permits and regulations. He ushered in important regulatory changes at the state level and established a more efficient government that triggered rapid economic development, which is opening India to private investment. For example, Modi’s efforts to lift restrictions on foreign direct investment (FDI) in the defense, railway, construction, and retail sectors are bearing out in the numbers. Total FDI surged 27% in fiscal year 2014-15 and is anticipated to climb higher this year. The 2016 GDP is expected to grow by 7.8%. These are the kind of numbers that prove to foreign investors that it is time tap into India’s strong potential and the logistics industry is taking notice.
References:
India passes China as most promising emerging market for logistics, survey says
The Last BRIC Standing
http://fortune.com/2015/12/28/bric-countries-india-narendra-modi/
India has defied the emerging market slump. Can it last?
http://www.cnbc.com/2016/01/07/india-has-defied-the-emerging-market-slump-can-it-last.html
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