Brahm

India Battered by Global Storm

This analysis is incisive! It implicitly focuses the reader on the essentials in the differences between the economies (and problems) of that of India with those of an emerging China. Or shall we say developed China!

The Indian (and also Brazil, perhaps) industrial growth story is still preserved though at a slower pace while that of China faces a significant slowdown or marginal decline. China's economy is much more meshed in with the larger global economy due to heavy export dependency, while India's is less so. The effect of commodities is larger on the Indian economy since it weighs in at heavier relative level in its consumption and much of it based on imports. Thus the effects of commoditities recently on Indian inflation based on this dependency has been much larger. Perhaps, with the fall in commodity prices globally there soon woul be significant relief from inflation for the Indian economy.

India is also likely to see significant pick-up in investments after the elections expected soon in development of its infrastructure which has been subpar in recent years. The authror's suggestion of the likelihood of the preservatgion of India's growth story is plausible. I would bet that it is highly likely. The one area of concern is in India's poor track record for development and growth of its farm sector and agri-industry.

Economic Outlook Dims for Russia; Slowing Seen for Europe, North America

Slowing in the BRIC countries is inevitable if there is slow down in the US and European Union. There is nothing that says, based on the fundamentals, that it should occur at the same time (rather same month) everywhere. However, in my view the slowdown in Russia may be more muted compared to that in China. Russia is less export dependent (outside energy and we can't do without Russian energy!), and it also has great scope to increase or maintain internal investment for internal consumption and infra-structure development.

If the US $ strengthens, then Chinese currency will appear to be weaker in terms of the rate vis-a-vis the US$ and Euro. This will result in more inflation in China, since China imports signgificant amounts of raw materials for its industry (re-exports of finshed goods), food for its urban classes, and luxury items for its upwardly mobile. Chinese exports may just slowdown under the thrust of its raw material and labour costs. As such, there is pressure from the rest of the world for China to let its currency appreciate.

Inflation is also bad for internal Chinese harmony where workers just get by because of the absence of collective bargaining or free lklabour movement. China is more afraid of internal stability and turbulence on account of inflation, than it is afraid of lower growth of its economy. Other fundamentals also are deterirating for China on a long rerm basis under the pressure of raw material and food costs.

There has been reports that multi-nationals are begining to look at other parts of the world for sourcing goods and investment in manufacturing, since the attrativeness of China is being seen to be eroding. Transportation and shipping costs are becoming more significant now due to the high price of oil. For example, it used to be that Chinese low and intermediate valued steel used to be feared in other parts of the world and the West. No more so! When the Chinese export these now, it is believed that they are not fully recouping the true cost of capital for these exports. High iron ore import costs, high transportation/shippin... costs back-and forth, and high import coking coal costs have to a large extent neutralized the advantages China had on labour costs. In similar way, in future China will face embedded disadvantages (vis-a-vis Brazil, India, Eastern Europe, or other developing/emerging economies) as a source of exports to the US and Europe.

The tumble of the Chinese markets in the last few weeks reflect these to some extent. I would be wary in over-investing in Chinese securities, until the fundamentals become more certain or favourable.

Battle of the BRICs: India vs. Brazil, Russia and China

Some of the issues you have made are valid considerations in support of your thesis. A few others you have failed to menttion, but should be factored into an analysis of the type cited. India produces a relatively larger impact on its GDP growth rate through a smaller reinvestment rate vis-a-vis China. India's private sector is a more significant generator of investor funds than China's state enterprise sector. With regard to minerals and agricultural produce India is much better situated relattively than China. Thus its need for hard currency funds on this count are more modest. India's economy has lesser energy intensity than that of China. Significant growth capital investment flow for India is accounted for more and more now by the Persian Gulf region and Southeast Asia. This appears to promise a healthier trend than in the past.