Global Economy - My perspective II

There have been many steps taken to stimulate demand in India and China. IMF projects that India and China will have to bear the brunt of Global growth in the coming years but I am not sure it will happen. here is why...

You don´t build a consumer society overnight. India is building a foundation for a consumer society, consider for example the per capita income in India has risen by over 50% since 2000-01 this is a good sign as income rises, disposable income rises and being humans we spend the excess. Where the spending is allocated is important in the overall scheme of things, Indians typically are conservative, however the Indian household has never been taught the power of investing or compounding so I believe 2/3rd of the households will squander the excess income and not create capital for investment. The remaining 1/3rd might know about investing and compounding but 50% of that might get burned in the stock market. I believe the best way for the excess to be spent would be to allocated the capital based on the demographic... if the head of the household is less than 40, I would allocated 50% of it towards buying a house if you don´t own a house already, 50% towards investments in good quality companies that pay divident. I think the context of India needs to be factored in while investing in India, India is lacking in power, infrastructure, healthcare, education and housing. I would try to see the trend on each of these sectors and if I cannot will allocate funds in equal proporation to good quality companies that pay divident in these sectors.

I have to admit that there are a lot of investment advice being dished by the banks in India but they are very convoluted and does not get into the psyche of the common middle class family. I think there needs to a conserted effort at the grass root level to stimulate investment and demand in India.

I am not an expert in China but I can extrapolate the scene is very similar to India but I think Chinese save more given the beating the stock market there has taken... and the rise in per capita income in China has been higher so there is more capital to be deployed. I think the only problem in China is the lack of property rights so people cannot invest in real estate and buy their home or land or a farm... I might be wrong but that is my perception.