The 'Growth' Slowdown - Strategic or Tactical
By: Amit Bhushan Date: 29th June 2015
Prelude: This article is inspired by numerous blogs and articles on the subject and attempts to raise questions that are discussed in mostly piecemeal fashion.
Much ink and intellect is wasted on the slowdown, in particular of China i.e. growth rates coming down to around 7-ish percentage and Chinese government scramble for domestic infrastructure projects which can kick-start quickly. Much is also said about the rise of Chinese currency stature alongside its exports of manufactures. With the assets bubble burst in West followed by the burst of commodity bubble in emerging markets, many of Western entities have rolled back the manufacturing facilities back home, from earlier situation where even hi-tech manufacturing was increasingly being off-shored. Since off-shoring was relatively higher in the US than Europe, it has led to increase in manufacturing jobs as well as rise in US currency. Europe has just kind of averted slide in its manufacturing partly due to competitive reasons and partly on account of weakening of its currency and quality of management of Greek exit will show if they are better or worse off from such an eventuality. The people of course do not have any 'real' rise in growth rates bur a slight and relative rise from past few years of slide or very little growth rates in developed and emerging economies. This is on account of capital chasing lower risk with little value add, rather than 'free flow' even in a 'surplus & free' market with loosening controls. It might be interesting to start a debate to check what kinds of controls are 'good controls', and what freedoms/loosening of controls- seem not to be gelling well with 'spirits of free enterprise' as aspired by 'free market capitalists' .
The Chinese are now busy to push for 'new markets' either by finding new exports destination or through push of domestic conglomerates to manufacture goods or primary resource materials into emerging markets. The result is extension of credit terms and sometimes overfunding of buyers as well. This is being done on the back of a simultaneous push for investments and trade in their own currency and this is also gaining traction in most emerging markets. The financing terms for consumption goods seem to be already reaching pinnacle due to a 'borrower's market'. Pretty soon there is likely to be a push for capacity and capability building in emerging market economies, so that the consumption can be re-paid or at least sustained. This is likely to witness strong competition from entrepreneurs from 'all' companies from developed as developing countries as enterprises in these economies slug it out after having developed an appetite for risks in emerging economies. These developing countries will of course need to develop suitable legal procedures that are acceptable to 'all' investors and adopt 'acceptably transparent' commercial procedures for carrying out businesses 'smoothly' by the investors. There is off course likely to be clamour from domestic companies as well as pulls and pressure from 'foreign investors' to take care of 'their interests', while such rules are laid out. With more 'trade' currencies being available, relatively more freely and at falling interest rates, trade as well as investments still seems to be declining. Pointers as some of the experts are hinting at, as the advent of 'depression'.
It may be interesting to note that while India is witnessing a clamour to define and modify laws in land and labour, we still are reluctant to talk about judicial capacity to handle contracts and enforce legislations. And 'all this' is apparently being done to uphold the interest of common man and to create much needed jobs in the economy. We also have a lot of noise on 'skill development', and 'entrepreneurship' though without any systemic improvement measures so far. The reportage on 'improvements' in existing school system or colleges/universities seem to be lacking; possibly because of our reliance on new IIT/IIMs is expected to care of the fixing required. This is despite of the fact that biometric classroom attendance for teachers as well as students is rather easy to implement than applying it on bureaucrats, most of who are supposed to be in coordination meetings on around 25-50 percentage of time (although such a thing is widely reported and success with public). Nearly the same thing is true about government service providers who seem to be always overloaded. A biometric system at all railway platforms and station including for vendor staff might be an eye opener and might result in actually a lot of savings on account of 'ghost' employees, though the government might be shy of making those acknowledgement and contended with 'fixing' such problems at Minister's core office teams only. It is such fixes that need to become broad-base in almost all emerging countries so that capital starts to chase high-value added projects rather than piece meal projects and unlock value that seems to be the need of the hour.
By: Amit Bhushan Date: 29th June 2015
Prelude: This article is inspired by numerous blogs and articles on the subject and attempts to raise questions that are discussed in mostly piecemeal fashion.
Much ink and intellect is wasted on the slowdown, in particular of China i.e. growth rates coming down to around 7-ish percentage and Chinese government scramble for domestic infrastructure projects which can kick-start quickly. Much is also said about the rise of Chinese currency stature alongside its exports of manufactures. With the assets bubble burst in West followed by the burst of commodity bubble in emerging markets, many of Western entities have rolled back the manufacturing facilities back home, from earlier situation where even hi-tech manufacturing was increasingly being off-shored. Since off-shoring was relatively higher in the US than Europe, it has led to increase in manufacturing jobs as well as rise in US currency. Europe has just kind of averted slide in its manufacturing partly due to competitive reasons and partly on account of weakening of its currency and quality of management of Greek exit will show if they are better or worse off from such an eventuality. The people of course do not have any 'real' rise in growth rates bur a slight and relative rise from past few years of slide or very little growth rates in developed and emerging economies. This is on account of capital chasing lower risk with little value add, rather than 'free flow' even in a 'surplus & free' market with loosening controls. It might be interesting to start a debate to check what kinds of controls are 'good controls', and what freedoms/loosening of controls- seem not to be gelling well with 'spirits of free enterprise' as aspired by 'free market capitalists' .
The Chinese are now busy to push for 'new markets' either by finding new exports destination or through push of domestic conglomerates to manufacture goods or primary resource materials into emerging markets. The result is extension of credit terms and sometimes overfunding of buyers as well. This is being done on the back of a simultaneous push for investments and trade in their own currency and this is also gaining traction in most emerging markets. The financing terms for consumption goods seem to be already reaching pinnacle due to a 'borrower's market'. Pretty soon there is likely to be a push for capacity and capability building in emerging market economies, so that the consumption can be re-paid or at least sustained. This is likely to witness strong competition from entrepreneurs from 'all' companies from developed as developing countries as enterprises in these economies slug it out after having developed an appetite for risks in emerging economies. These developing countries will of course need to develop suitable legal procedures that are acceptable to 'all' investors and adopt 'acceptably transparent' commercial procedures for carrying out businesses 'smoothly' by the investors. There is off course likely to be clamour from domestic companies as well as pulls and pressure from 'foreign investors' to take care of 'their interests', while such rules are laid out. With more 'trade' currencies being available, relatively more freely and at falling interest rates, trade as well as investments still seems to be declining. Pointers as some of the experts are hinting at, as the advent of 'depression'.
It may be interesting to note that while India is witnessing a clamour to define and modify laws in land and labour, we still are reluctant to talk about judicial capacity to handle contracts and enforce legislations. And 'all this' is apparently being done to uphold the interest of common man and to create much needed jobs in the economy. We also have a lot of noise on 'skill development', and 'entrepreneurship' though without any systemic improvement measures so far. The reportage on 'improvements' in existing school system or colleges/universities seem to be lacking; possibly because of our reliance on new IIT/IIMs is expected to care of the fixing required. This is despite of the fact that biometric classroom attendance for teachers as well as students is rather easy to implement than applying it on bureaucrats, most of who are supposed to be in coordination meetings on around 25-50 percentage of time (although such a thing is widely reported and success with public). Nearly the same thing is true about government service providers who seem to be always overloaded. A biometric system at all railway platforms and station including for vendor staff might be an eye opener and might result in actually a lot of savings on account of 'ghost' employees, though the government might be shy of making those acknowledgement and contended with 'fixing' such problems at Minister's core office teams only. It is such fixes that need to become broad-base in almost all emerging countries so that capital starts to chase high-value added projects rather than piece meal projects and unlock value that seems to be the need of the hour.