What emerging realities do you see in light of the emerging economies? Which among these new economies do you feel would outpace the others? Quote examples and facts to support your argument.
Emerging economies (EE) are those economies which profit from a substantial economic growth based on significant productivity gains, technological change and a change in their economic philosophy. Most often these economies are characterized by high growth rates, large population density, low cost low knowledge workers, poor literacy rates, more than half of the economically active population lives in rural areas, high employment in unorganized sector with very little contribution to GDP, political instability, strong currency turbulence and a high foreign debt. Nowadays EE have become a buzz word in developed nations. Everyone wants to talk about EE and everyone wants to invest in EE. We have to analyze such factors which have triggered this action among developed nations.
This modern age is marked by two major changes in the way people do business. One the business has become very competitive and second the consumer has become more demanding. Now consumer demands more value added services at very competitive prices and companies have to do as demanded by the consumer otherwise some one else will do it and these companies will be out of business. So, there is a lot of focus on producing quality and innovative products at very low cost. Though it is not very easy to produce innovative products at regular intervals but some how companies are able to do so. The hardest part is to control the cost so that the product is delivered to customers at competitive prices. This is where EE come into pictures. Multinationals (MNCs) outsource their production units to EE to get benefit of low cost workers and in this way they reduce the cost of their products.
Globalization of business is another emerging reality. Only those companies can grow and sustain in future which have expanded their business throughout the world. EE are marked by high population density. So, they are very attractive markets for MNCs. That is why we see that all MNCs have their operations in these markets. There may be another incentive also for this strategy. Since population of EE is not very educated and sophisticated as in developed nations so MNCs can sell their low tech products, which have no market in developed nations, in these countries. But with the advancement in information technology this trend is fading day by day.
Equity markets of EE offer high returns than those of developed nations but at the same time they are quite volatile also. But because of high returns in equity markets a lot of investment is coming to EE which was not the case a few decades ago. This trend is triggered by the deregulations of equity markets in EE. Another reason for high direct investment is the need for building infrastructure in EE to support large population and growth. Governments of EE have achieved this by privatizations or by public private partnerships.
EE are not concentrated in any one part of the world. They are scattered all over the globe and to tell which economy will out outpace the all others is not an easy thing to say. Nevertheless I will try to reach to a conclusion by applying a systematic approach based on the characteristics of EE given earlier. I think population density, which in turn depends on population and area, of a country has a lot to do with this decision because cheap labor, huge consumer markets and volatile equity markets depend on it. So after establishing this fact if I see the list seven most populated countries and seven largest (area wise) countries I come up with three names, Brazil, China and India. Below are some facts of these countries:
Emerging economies (EE) are those economies which profit from a substantial economic growth based on significant productivity gains, technological change and a change in their economic philosophy. Most often these economies are characterized by high growth rates, large population density, low cost low knowledge workers, poor literacy rates, more than half of the economically active population lives in rural areas, high employment in unorganized sector with very little contribution to GDP, political instability, strong currency turbulence and a high foreign debt. Nowadays EE have become a buzz word in developed nations. Everyone wants to talk about EE and everyone wants to invest in EE. We have to analyze such factors which have triggered this action among developed nations.
This modern age is marked by two major changes in the way people do business. One the business has become very competitive and second the consumer has become more demanding. Now consumer demands more value added services at very competitive prices and companies have to do as demanded by the consumer otherwise some one else will do it and these companies will be out of business. So, there is a lot of focus on producing quality and innovative products at very low cost. Though it is not very easy to produce innovative products at regular intervals but some how companies are able to do so. The hardest part is to control the cost so that the product is delivered to customers at competitive prices. This is where EE come into pictures. Multinationals (MNCs) outsource their production units to EE to get benefit of low cost workers and in this way they reduce the cost of their products.
Globalization of business is another emerging reality. Only those companies can grow and sustain in future which have expanded their business throughout the world. EE are marked by high population density. So, they are very attractive markets for MNCs. That is why we see that all MNCs have their operations in these markets. There may be another incentive also for this strategy. Since population of EE is not very educated and sophisticated as in developed nations so MNCs can sell their low tech products, which have no market in developed nations, in these countries. But with the advancement in information technology this trend is fading day by day.
Equity markets of EE offer high returns than those of developed nations but at the same time they are quite volatile also. But because of high returns in equity markets a lot of investment is coming to EE which was not the case a few decades ago. This trend is triggered by the deregulations of equity markets in EE. Another reason for high direct investment is the need for building infrastructure in EE to support large population and growth. Governments of EE have achieved this by privatizations or by public private partnerships.
EE are not concentrated in any one part of the world. They are scattered all over the globe and to tell which economy will out outpace the all others is not an easy thing to say. Nevertheless I will try to reach to a conclusion by applying a systematic approach based on the characteristics of EE given earlier. I think population density, which in turn depends on population and area, of a country has a lot to do with this decision because cheap labor, huge consumer markets and volatile equity markets depend on it. So after establishing this fact if I see the list seven most populated countries and seven largest (area wise) countries I come up with three names, Brazil, China and India. Below are some facts of these countries:
Brazil
Population density per square meter 22
Population Growth Rate 0.9%
Real Growth Rate 5.4%
Literacy Rate 88.6%
Labor Force 96.34 m
% of Labor Force associated with agriculture 20%
Population density per square meter 22
Population Growth Rate 0.9%
Real Growth Rate 5.4%
Literacy Rate 88.6%
Labor Force 96.34 m
% of Labor Force associated with agriculture 20%
China
Population density per square meter 142
Population Growth Rate 0.6%
Real Growth Rate 11.4%
Literacy Rate 90.9%
Labor Force 798 m
% of Labor Force associated with agriculture 45%
India
Population density per square meter 386
Population Growth Rate 1.5%
Real Growth Rate 9.2%
Literacy Rate 61%
Labor Force 516.4 m
% of Labor Force associated with agriculture 60%
It is clear that Brazil has no chance when it comes for comparison with China and India. Between China and India I think the latter will outpace the former. Though right now it seems that China is far ahead then India but there are vital signs that soon India will emerge as one of the leaders in the world economies, for instance, India population density and growth is far greater than China and literacy rate is quite low, majority of its labor force is associated with agriculture. All these signs make India the best candidate for the next power of the world. Moreover, India has advantage over China when it comes to demographics. India has a very large proportion of young ones in its population while for China it is opposite. So, in future India has more chances to attract FDI, MNCs which will boost its economy. I think now world has also acknowledged the fact that they cannot ignore India economy by signing nuclear deal with it. I think India is all set for future world leader.
It is clear that Brazil has no chance when it comes for comparison with China and India. Between China and India I think the latter will outpace the former. Though right now it seems that China is far ahead then India but there are vital signs that soon India will emerge as one of the leaders in the world economies, for instance, India population density and growth is far greater than China and literacy rate is quite low, majority of its labor force is associated with agriculture. All these signs make India the best candidate for the next power of the world. Moreover, India has advantage over China when it comes to demographics. India has a very large proportion of young ones in its population while for China it is opposite. So, in future India has more chances to attract FDI, MNCs which will boost its economy. I think now world has also acknowledged the fact that they cannot ignore India economy by signing nuclear deal with it. I think India is all set for future world leader.
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