FOCUS Graphiti

RISING
1
The share of India and China in the world economy will grow three-fold by 2030 Nominal global GDP 2030, $308 trillion Nominal global GDP 2010, $62 trillion
Figures in %

CHINDIA

As the world emerges gingerly from the recession, the structure of the global economy is changing. It will be powered by China and India over the next couple of decades.

2 India 10 + 11 34 + 9 China 24

2
6 Asia 8 ex-CIJ* 9 Japan 3 24 US 12 China

... and almost one-third of the global growth by 2030 will come from China and India
Figures in %

India 9

Rest of the world

22

28

27 EU 14

EU

15
Rest of 29 23 the world Asia ex-CIJ* US

10

14 2

Japan

*China, India, and Japan

TO HERE
THE ONION CRISIS

STEPS

1
December 19, 2010
Onion prices hit a high of `80 per kg.

2
December 20, 2010
Onion exports banned till January 15, 2011, to check prices.

24 BUSINESS TODAY February 6 2011

BT Retro

ensuring that Asia will be a key driver of global trade

Asias share of world exports (%) 40

January 1, 2006

Bearish Symptoms
THEN: After 9,000 its only natural that the punters start setting new targets for the benchmark Sensex 12,000, and 15,000 for 2006 are just two of them. Such naked bullishness is not unwarranted, but it is not as if there are not any dark clouds hovering over Phiroze Jeejeebhoy Tower, the headquarters of the Bombay Stock Exchange (BSE). One particularly gloomy patch in the sky is courtesy the rupees decline against the US dollar, which has been a major worry for foreign institutional investors (FIIs), whose liquidity has been largely responsible for the current bull run. A falling rupee will naturally bring down the returns of FIIs investing in Indian market. Yet another factor that is turning the tide against India is the measured hike in the US Fed rate from a decade-low one per cent to four per cent. With rates expected to go up to 4.5 per cent or a maximum five per cent, short-term speculative FII dollar inflows have received a jolt. The Fed rate hikes are boosting the dollar, as more Asian economies begin chasing the US treasury for higher returns. In the meanwhile, corporate India is in expenditure mode, which could bring down the return on equity and the return on capital employed. The rising interest rates, domestically and globally, will also put pressure on the margins. In fact, South Korea, Indonesia, Thailand, and Singapore have seen upward movements in interest rates. Are the FIIs watching? NOW: It is a complete trend reversal. Surging FII inflows are driving the Indian stock market. Higher interest rates in India make the country a magnet for foreign capital, putting upward pressure on the rupee.

30

20

10 1990 1995 2000 2005 2010 2015 2020 2025 2030

4
50 45 40 35 30 25 20

Indias investment is fast catching up with Chinas which should make it the fastest-growing economy soon
Investment as % of GDP

China India
1990 1992 1994 1996 1998 2000 2002 2005 2006 2008 2010

5
30% 20% 10% 0% -10% -20%

... and the rapid growth will be driven by favourable demographics

95 mn 4 mn -51 mn
2000-2010 2010-2020 2020-2030

Contribution to the global working-age population

144 mn 95 mn

118 mn

China India

S A N T O S H K U S H WA H A

Source: IMF, UN, World Bank, Standard Chartered Research

3
December 25, 2010
Prices ease to `40-50 per kg across the country as the ban starts to work.

December 29, 2010

Imports from Pakistan begin to arrive.

5
January 6, 2011
Indias food price index up by 18.32 per cent.
MANU KAUSHIK

February 6 2011 BUSINESS TODAY 25

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