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.”
Cadburys, Cocoa and Coconuts
Here is a terrific example of how a long established business sees an emerging economy not just opportunity for growing sales and profits but also as a centre for production.
read more...»The Supply-Side Benefits of Imports
Many students on introductory economics courses hold on to a rather naive view that exports are good and that importing is negative for economic performance. Exporting for its own sake (mercantalism) carries obvious risks as countries that have accumulated huge trade surpluses have found out. And access to cheaper imports of goods and service can have a very liberating effect on the supply-side of the economy. Lower priced imports create competition for domestic industries and allow home-based manufacturing businesses to source cheaper intermediate and capital goods.
You would expect the Economist to support trade liberalisation - but this feature in the Economist is worth reading for students who want to understand some of the supply-side benefits of reducing import tariffs.
“As part of those reforms, India slashed tariffs on imports from an average of 90% in 1991 to 30% in 1997. Not surprisingly, imports doubled in value over this period. But the effects on Indian manufacturing were not what the prophets of doom had predicted: output grew by over 50% in that time. And by looking carefully at what was imported and what it was used to make, the researchers found that cheaper and more accessible imports gave a big boost to India’s domestic industrial growth in the 1990s.”
The rest of the article is here - The merits of imports
Q&A: Are there countries not in recession this year?
The simple answer is yes! Although the world economy is forecast to experience a recession this year (Deutsche Bank have pencilled in a 1.9% contraction in global GDP for 2009 and the G7 nations will see output slump by 4.5%), there will always be countries at different stages of the business cycle and those who for one reason or another manage to avoid the worst of the fall out from the global financial and economic crisis. Using forecasts for 2009 from the economics team at Deutsche Bank here are some of the countries expected to avoid a full-blown recession:
read more...»Imbalances and the Economic Crisis
James Bevan, Chief Investment Officer CCLA Investment Management Limited gave a talk to the Eton College Keynes Society on Thursday - it was full of insight into the causes of the financial crisis and the chances of a sustained recovery in the next year or two.
read more...»Indian Shipping Stocks
Shares in Indian shipping firms jumped today after the Baltic Dry Index, the London based measure of costs for shipping dry bulk commodities, rose 14.6%.
read more...»Renault-Nissan announce entry into low-cost car market in India
The battle is intensifying to develop, manufacture and sell low priced family cars to meet the burgeoning demand from consumers in emerging markets. Renault and Nissan announced today that they are entering into a joint venture with the India firm Bajaj Motors to jointly build a $2,500 car to compete with Tata Motors’ Nano mode. A new 400,000 capacity plant is being built in Chakan, Maharashtra and the aim is to bring the car to the market in 2011.
read more...»The Decoupling Debate
The D word - ‘decoupling’ - is at the heart of the debate regarding global economic prospects for 2008 and beyond.
The term refers to the shift by developing economies - and newly industrialising countries in particular - away from dependence on strong demand in the West for their products.
read more...»Learning Lessons from: Naina Lal Kidwai
Last night at The Worshipful Company of World Traders’ Annual Tacitus Lecture, Naina Lal Kidwai spoke on “India’s emerging role in the global economy”. She is the CEO of HSBC India, the first Indian woman to graduate from Harvard Business School, and Fortune magazine listed her as the 34th Top Women In Business. I’m sure you’ve all been learning about the “glass ceiling effect” in your Work & Leisure modules, and she is a perfect example of an outright defiance of that.
read more...»Indian economic growth set to slow
This BBC news report provides a good short case study on some of the causes of an slowdown in an economy. The expected rate of real GDP growth for India is forecast to dip in 2008. ‘High Indian interest rates have led to a stronger currency that could make the country’s exports more expensive on world markets’ and ‘India is expected to slow slightly in the coming year as a severe US downturn saps demand for exports.’ The article also emphasises how, despite a rapid economic transformation in recent years, the living standards of nearly seventy per cent of India’s population remains tied to the fortunes of her agricultural sector. India has grown by 9.4% and 8.7% in the last two years more than twice the average growth for the world economy as a whole. Inflation is running at just over 4 per cent a year. Although the article suggests that a US downturn will hit the Indian export sector, only 2.3 per cent of her exports go to the USA a contrast to China whose exports to the States are 7.3 per cent of her global export sales.
An Evening with an Inspirational Economist
Halfway through Jim O’Neill’s talk to the Keynes Society last night I realised properly for the first time in several years why I teach economics. There are few subjects that happen in real time, in internet time – and few where there are so many constantly changing issues to confront and events and trends to make sense of. We live in utterly fascinating times, and lying just beneath the surface of so many of the critical economic and geo-political debates is a seismic shift in the global economy’s Teutonic plates. The rise of the BRIC economies and the Next eleven (N-11) was the subject of an inspiring talk by the Managing Director & Head of Global Economic Research at Goldman Sachs.
read more...»Wolf on a Waking Giant
Martin Wolf is always eminently readable on globalisation. His recent book ‘Why Globalisation Works’ is widely regarded as one of the most complete and authoritative jusifications for the current wave of globalisation. Martin is on good form in a special report in the Financial Times this week on India and Globalisation.
He writes
‘India is not China. Its development path has been very different and, so far at least, its global impact far smaller. But it is now more open to the world economy than at any time in its post-independence history and more economically dynamic than ever before. India’s decision in the early 1990s to embrace the world economy, as part of a wider embrace of the market economy, has led to an accelerating opening up of its economy. While its impact on the world is still relatively modest, it will continue to grow.The impact on India itself is less modest and growing fast. Both sides – India and the world – will need to get used to the experience: they will grow much closer together in the years ahead.’
At the heart of the article is a neat comparison and contrast between the economies of China and India in terms of
Exports of merchandise products
Exports and imports as a share of national income - a guide to trade openness
The scale of current account surpluses and foreign exchange reserves
Inflows and outflows of foreign direct investment
Control of exchange rates
Read the rest of his article here
