Unit 4 Macro: Focus on India - World’s Cheapest Computer
A few weeks ago came the announcement that an Indian business is finally set to launch the World’s cheapest tablet computer. This laptop device will sell for around 18 times less than the price of an iPad in London! How can a laptop be manufactured for less than $US 40?
read more...»Unit 4 Macro: Focus on India - Supply Side Issues
The rapid growth of the India economy has been helped by her economy enjoying a number of supply-side advantages. That said there remain structural supply-side weaknesses that will limit her continued competitiveness and development. This blog looks at the plusses and the minuses.
read more...»Unit 4 Macro: Focus on India - Economic Growth
This is the first of a short series of blogs focusing on economic growth and development in the Indian economy, Our first blog provides some background data and study videos on India.
read more...»Unit 4 Macro: India - the Road Ahead
Here is a short 12 minute video on prospects for the India economy produced by economists at the International Monetary Fund. It covers some of the key current issues including high inflation in a supply-constrained economy, partial progress in reducing poverty and the impact that poor infrastructure has as a constraint on further growth and development. Click on the video link below
read more...»Jim O’Neill - The Growth Map: Economic Opportunity in the BRICs and Beyond
Jim O’Neill the Chairman of Goldman Sachs Asset Management has a new book published early next week and it looks like being a tremendous resource for teachers and students wanting to deepen their understanding of crucial changes in the global economy. The Telegraph has been publishing extracts from the book - to have a view please click on the links below:
read more...»Unit 4 Macro: China and India - Notes from Martin Wolf
Pete Davies from Greenhead College attended a superb talk by Martin Wolf CBE (Financial Times) at Leeds Business School last week. The focus was on the Great Convergence between developed and emerging economies, and Peter kindly took some excellent notes from the talk which will be of great use to teachers and students covering this key globalisation / development topics. They can be downloaded below as a word file - many thanks to Peter for making them available through the blog!
Martin_Wolf_Lecture_Oct_2011.docx
The Scale of Remittances
Remittances are the sending of money to people in another country. Despite a recent dip because of the global recession, total remittance flows have grown in the world economy over the longer-term as the scale of migration between countries has grown. For many lower-income nations, remittance income is now a sizeable contribution to their Gross National Income (GNI) The World Bank estimates that there are over 250 million people living overseas who send some of their earned income back - remittances to all countries topped $305bn in 2008. The biggest single recipients of remittances are India, Mexico and China but measured as a share of national income is probably a better way of considering their relative importance. The World Bank calculated that in 2007, remittances as a share of GDP was particularly high in these countries:
Tajikistan (45%)
Moldova (38%)
Tonga (35%)
Lesotho (29%)
Honduras (25%)
Our Timetric charts provide some data background to the importance of remittances
Chinese and Indian Railways - Importance of Infrastructure
Two videos show the stark contrast between rail networks between China and India! Good for understanding a little more about the importance of rail network investment (high speed and conventional) as a platform for economic growth and development.
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Globalisation - Peering into the MIST?
Is Jim O’Neill at it again? A decade or more ago he coined the acronym BRIC for four emerging economies set to reshape the boundaries of power and influence in the global economy. Now he is making frequent reference to another cluster of four countries that together spell MIST. Can students name them?
read more...»Smartphones and Apps - Complementary Demand
Smartphones and Apps - a good example of two products in joint demand - and this BBC news video from India looks at the commercial opportunities for online apps retailers as market demand surges in emerging markets. I will be using this short video when teaching complementary demand.
Autumn leaves are falling for the global economy
The arrival of the Fall is often a time to take stock of where the global economy is heading and there have been several perceptive and fascinating blogs on this in recent days.
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Potash - a battle for grey dust that has become gold dust
The market for a particularly lucrative gray dust has been thrust into the spotlight this summer with news of a $38.5bn (£25bn) hostile takeover bid from Australian mining giant BHP Billiton for Potash Corp of Saskatchewan in Canada a business coined by some as the “Saudi Arabia of Potash”!
read more...»Indian Economy Chartroom
Shubham Puri a visiting student from Mayo College India gave a super presentation on the Indian economy to one of my Year 12 economics classes this morning. It inspired me to call up a range of charts on the state of health of the Indian economy - one of the new key drivers of world demand and a vital component in the BRIC hypothesis!
It was interesting to hear from Shubham how much weight he attached to corruption as a factor holding back the underlying growth rate of the Indian economy. There are widespread doubts for example about the economic and social legacy of India’s hosting of the Commonwealth Games in Delhi later on this year.
Chronic unemployment in urban areas and much disguised unemployment across the country remain deep-rooted features of the Indian labour market despite impressive rates of growth and rising per capita incomes. Shubham confirmed that weak infrastructure is one of the aspects that contrasts India’s current situation with that of China.
Earlier on this week I heard Nouriel Roubini say in a lecture at the LSE that infrastructure in China is way ahead of where China has any right to be! Over ninety per cent of growth in China last year came from a massive surge in capital spending (capex). Too much investment in China will leave the economy with a glut of unused capacity and a major deflation problem once the short-term overheating is resolved.
Here is a brief presentation highlighting some of the key macro trends for the Indian economy.
Indian Economy Chartroom - Streamed Presentation
Download printable slide handout
And here is a wonderful short video My India that Shubham included at the end of his presentation
Agflation in the Indian Economy
Steep increases in the costs of ingredients have contributed to high rates of food price inflation in the Indian economy. And rising food prices have been one of the key reasons why inflation in India is now amongst the highest in the world - on some estimates, food prices account for half of the acceleration in consumer price inflation posing a policy dilemma for the Indian central bank. This BBC news video provides good background on the issue of cost-push inflation in India and the impact of higher food prices on real incomes.
A2 Economics Revision - Changing Pattern of Global Trade & Investment
This new streamed revision presentation guides students through some key evaluation points on the changing patterns in global trade & investment. Ideal for A2 revision.
Revision Presentation on the Changing Pattern of Global Trade & Investment
BRIC economies
The BRIC grouping is shorthand for four countries – Brazil, Russia, India and China – and the BRIC acronym has become popular to describe the growing power and influence of emerging markets in the global economy. The BRICs already have a bigger share of world trade than the USA and China is on the verge of surpassing Japan as the second largest economy in the world.
read more...»Living in a multi-polar world economy
Although many millions of people in the lowest income countries have suffered greatly from the world recession, for many emerging countries growth has continued apace and the world economy is more resilient than the consensus view believes. This was one of the arguments explored by Jim O’Neill, Head of Global Economics, Commodities and Strategy Research for Goldman Sachs, in his talk to the 40th Anniversary meeting of the Eton College Keynes Society last night. The creator of the BRIC acronym was also quite bullish about prospects for the UK economy, with Britain able to take advantage of a competitive exchange rate and a strong rebound in global economic activity driven forward by fast growth in emerging market countries.
read more...»India raises interest rates
Sean O’Grady writes here about the decision by the Reserve Bank of India to raise interest rates once more to combat retail price inflation that hovers just below the ten per cent mark. A volcanic hat tip to John Richards from Tonbridge for spotting this one.
John points out that the article covers some really interesting macroeconomic aspects: namely the use of policy interest rates to control a booming economy, changes in reserve asset ratios (remember them?) as a tool of monetary control (limiting new bank lending), And also the high importance of food in the inflation basket for Indian consumers and the uneven impact of growth on the poorest parts of Indian society.
“The World Bank has said that faster economic growth has seen rising disparities between urban and rural areas in India, prosperous and lagging states, and skilled and low-skilled workers. India’s richest states have incomes that are five times higher than those of the poorest states – a gap that is higher than in most other democratic countries, and may damage social cohesion.”
How does inflation affect us? A great example from India
A hat tip to Sibylle Hyde from the Ellen Wilkinson School for Girls for spotting this super BBC news article on wage and inflationary pressures in India. Sibylle writes: “I found this BBC article on wage inflation in India, attached with suggested questions. I have used it for year 12 Economics & Business students (“how does inflation affect us all”) but then also gave it to year 13 Economics students for practice on international competitiveness.
The article and discussion questions are attached below.
How_does_inflation_affect_us.docx
PIGS or BRICS - which is most important for UK exports this year?
The PIGS - Portugal, Italy, Greece and Spain - are in economic turmoil and likely to experience weak growth in the near term. A contrast to the BRICs - Brazil, Russia, India and China - three of whom are already seeing a ramping up of their growth rates as the world economic cycle turns. But which group is more important for the UK export sector? Chris Giles from the Financial Times has the answer here and his blog provides a useful evaluation point for AS and A2 macroeconomics students.
India ramps up infrastructure spending to sustain growth
Rapid growth has put India’s creaking infrastructure under tremendous pressure. The Indian government has sharply increased investment spending on infrastructure with ambitious projects such as adding 20km of new roads each day! Can the spending projects deliver? This BBC India Business Report looks at the rise in investment spending.
Focus on the BRICs
The following video clips from the FT focus on the so-called BRIC economies (coined by the Chief Economist at Goldman Sachs in 2001).
There are excellent to provide discussion points on why grouping the BRIC (Brazil, Russia, India, China) economies together is flawed, with the 4 countries being actually very different and the acronym BRIC no longer being appropriate, in its description of their experiences or their futures. They also discuss whether economic power has shifted from the US to the East.
Indian Economy on the Rebound?
An interesting update on the strength of the Indian economy in this BBC video, which focuses on the relatively confidence amongst India’s more affluent consumers (and the fashion & retail industries that target them).
According to this newflash from Nasdaq this morning, the Indian Economy is expected to have grown by almost 8% in the year to 2010, getting close to the average of 9% over the four years to 2008.
Jim O’Neill Remains Hugely Positive on the BRICS
A fascinating, short interview on Bloomberg today (4 Jan 2010) with Jim O’Neill (Cheif Economist at Goldman Sachs) talking about the economic prospects of the BRICS in the next decade.
read more...»Peak Gold
If world supply of gold is now past its peak, the bull run for gold on world bullion markets may have some distance to travel, This is the interpretation of this article in the Telegraph which reports that global gold output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run. This BBC video report looks at the decision of India’s government to purchase of 200 tonnes from the International Monetary Fund - the single biggest gold purchase by a central bank in the past 30 years. The government is exchanging US dollars for their gold equivalent - a hedge against rising world inflation and a weakening dollar.
GDP per Capita - A Cool Way to Show the Data
I came across a cool interactive resource on GDP data whilst doing some research tonight on the BRICS.
read more...»Fascinating interview with BRIC creator
The Evening Standard has a fascinating interview with Jim O’Neill, Chief Economist at Goldman Sachs, the man credited with coining the BRIC acronym that has come to capture much of the essence of the rise to economic prominence of a cluster of fast growing emerging market countries.
“The economic tectonic plates are shifting and the person who first spotted the development of a new order was O’Neill. “I’m regarded as the creator of Brics [the economies of Brazil, Russia, India and China] in the analytical world. I thought of it eight years ago - it was the same time as people became aware of the emerging markets. Until then, they’d not been lumped together.” He laughs. “I suppose they’ve formed a large part of my analyst life ever since. At least once and up to eight times a day, I’m asked to give a talk somewhere in the world about Brics. What’s funny is that until I wrote about it, I’d never been to any of them, except China.”
Imbalance between supply and demand drives sugar prices to 28 year high
There is plenty of coverage today of the news that the global price of raw sugar has increased to its highest level since March 1981 on the back of a widening imbalance between world supply and demand.
The hike in sugar prices is a classic market response to a rise in demand for sugar - especially in countries such as Brazil where a growing volume is being used as a (subsidised) source of ethanol - combined with supply shortages caused by low rainfall during the monsoon season in India and China and hail and drought affecting supplies from Russia.
Sugar output in India has contracted by more than 45% over the last year and the country is on the point of moving from being a net exporter to a net importer of sugar if measures are taken to limit existing exports to maintain sufficient supplies for the home economy. Global sugar demand will exceed output by as much as 5 million tons in the year through September 2010, according to the International Sugar Organization in London.
When demand exceeds supply, existing stocks fall and this is a key factor driving prices higher. Speculators can cause the price movements to be exaggerated as they trade in the forward markets to buy up available stocks in the expectation of further price increases.
Independent: Chasing a sugar rush: global deficit drives price rises
Telegraph: Sugar price hits 28-year high
Bi-lateral trade deals - India and South Korea
Bi-lateral trade deals have become an increasingly common feature of the global trade landscape in recent years as countries have reacted to the failure to reach multilateral agreements. Here is a good example of such a deal between India and South Korea.
India’s Stunning Progress
Martin Wolf has a super piece in the Financial Times considering that must happen in India for the country to sustain the remarkable economic progress achieved in recent years. Fast growth creates economic, social, political and environmental challenges. India’s growth potential remains strong but, given the country’s increasing openness in the world economy, her fortunes will be guided increasingly by the health of the global economic system. Infrastructure bottlenecks must also be addressed especially in the way in which poor infrastructure damages the performance of India’s major cities.
Martin Wolf writes:
“The recent past offers at least four reasons for optimism. First, the rate of growth has been accelerating: over the five years up to and including 2008, the average annual rate of economic growth was 8.7 per cent, up from 6.5 per cent at the previous peak in 1999. Second, vastly higher savings and investment underpin this acceleration, with gross domestic savings up to 38 per cent of GDP in the financial year 2007-08. Third, India’s economy has globalised, with the ratio of trade in goods and services up to 51 per cent of GDP in the last quarter of 2008, up from 24 per cent a decade before. This was not far behind China’s 59 per cent of GDP.”
