To be honest Matsui, all economies of the world on a knife edge at the moment. Look at the developed world- Japan is in a never ending recession, US & Europe have virtually zero interest rates and are still showing low growth. The stock markets are not showing much of a recovery either. In situations like this, the most vulnerable economies are those of the developing countries.
We have seen what happened in S Korea, Indonesia, Russia & Argentina etc recently. All for different reasons but same theme- too much short term growth but poor infrastructure beneath the glamour. So who is to say that the same will not happen in Pakistan- or India for that matter.
Pakistani economy is fragile and there is not a lot of foreign investment coming in. The current boom is really making up for years of stuttered growth and is boosted by the foreign remmittances of Pakistani abroad who have stopped using the “hondi” system. In the case of any crash, there will not be much effect (I think) on the economy as there is not much of a bubble to burst!!
I think that Indian economy is more likely to crash as it is all based on an illusion. There has been alot of foreign investment in India. This all happened in the 90s when India opened herself to the world. Many companies went in thinking that with a billion or so consumers, they can’t go wrong. A very rosy picture was painted by India at the time to attract them. There has been a realization since, that all is not well. Out of the billion consumers, only a few million can afford to eat never mind buying luxury goods!! A few hotspots are keeping the whole country afloat. So if anything happens in India there is a massive bubble to burst and it is gonna hurt.
khattana Bhaijaan, however we cannot hold the same yard sticks for the developing world to that of the developed. I agree with you on the remittances part. that has already been factored into the health check of the flow of funds. China has 300-400 million people in poverty as well. You have close to 200 million in china that is migrant labor. The rural areas as as backwards as any part of subsaharan africa. Same as India. But with each % point increase in economic fortunes of the country as a total, the trickle down effect means greater choices for large populations.
I do disagree strongly on your analysis with India. Your scenario is more related to China. if you ask which MNC';s are benefitting from CHinese consumption or are actually making profit. It would be negligible. Indian economy is actually heating up quite a bit. Avg. age of home owners has comedown by 20% in the last 8 years. That means that there are a lot of young people who a re making money. Secondly, the domestic consumption in INdia is the greatest provider of GDP figures as opposed to let's say china, which is an export driven economy. A middle of 250-300 million in INdia is drivinig a trickle down growth. You are absolutely correct in saying that there are regional imbalances in growth. It is important for the laggard states to get with the program for the sake of their own citizens.
Let me give you a number. for each 1.0% of GDP growth y/y, means that 10-15 million people come out of poverty in a country that is the size of India/China
I would like to hear about the numbers from the pakistani folks and what they mean.
Fdi in India Down 24% at US$4.66 BLN Last Fiscal Year
NEW DELHI, Sept 4 Asia Pulse - Admitting that infrastructural bottlenecks were deterring foreign investment, the Indian Finance Ministry on Wednesday said FDI inflow declined by 24 per cent to $4.66 billion last fiscal.
Despite revising the FDI definition, India is still far behind China in attracting investments, Chief Economic Advisor Ashok Lahiri said here.
“We have to improve the investment climate. The main constraint is both physical and social infrastructure, which came in the way of not only FDI but also domestic investment,” he said.
However, the FDI flows have started improving lately, reflecting signs of industrial recovery and better investor sentiments. “You will see action (more FDI inflows) in coming months. Already there are signs of it,” he said.
Finance Ministry revised the definition of FDI incorporating 14 items like equity capital, reinvested earnings and other capitals, to align it with best international practices so that the inflows become comparable with other nations.
FDI inflow was at $4.66 billion in 2002-03 under the revised norm compared to $6.131 billion in 2001-02 and $4.029 billion in 2000-01.
Under the previous definition, the FDI inflow was at $2.574 billion last fiscal compared to $3.905 billion in 2001-02 and $2.342 billion in 2000-01.
^ hurrrmp! CIA - that's your best source? I challenge you to come up with a credible source instead of the muslim burning hindu CIA website! Everyone knows Vajpayee wrote the software and Sharon is content manager