Nov 07

India – Trails & Trials

We hear from the various media about the long-term growth of China and India.  China seems to have a little more coverage in the Australian media so we thought it would be useful to know a little more about India, a country culturally very diverse from Australia, where a large proportion of the population speak English and more than 50% of the population is below the age of 25 and more than 65% are aged below 35. 

According to United Nations estimates the population is expected to reach 1.4 billion by 2025, and almost 70% are likely to be of working age, with an average age of 29.  (Very different from Australian population estimates where almost 23% of the population (an estimated 35 million) will be aged 65 or older by 2050.)

India has a very rich and vibrant culture.  Possessing an ancient heritage, now a democracy of more than a billion people in a country approximately one third the size of Australia.  The divide between the rich and poor has always been visible and continues today with the majority of Indians still living in poverty.

Prior to the advent of the East India Company, and the phase of colonisation, each village in India was a self sufficient and all economic needs were fulfilled in the village.  The arrival of the East India Company in India ruined the existing Indian economy and in the period from 1770 – 1952 India's share of world income (GDP at factor cost) declined from 22.3% to 3.8%.  Following independence India has been progressively rebuilding their economy and trade and financial liberalisation opening up foreign investments have helped India gain momentum

The Indian economy, in terms of purchasing power is the third largest in the world.  Goldman Sachs predict that by 2035 India will be the third largest economy after the US and China.  Economically India faces high inflation, the primary contributor being food inflation.  It is not the inflation of high demand, it is simply the inflation of a government trying to keep the majority of its population above the poverty line.

The government is succeeding as the figures of people living below the poverty line have decreased from 89% five years ago to 61% today.  This is still an on-going inflation burden as, due to seasonal weather changes or catastrophes, simple necessary food items can rise by more 100% in one year to fall the following year (not unlike the banana crisis in Queensland following cyclones and floods).  The government also faces pressures of constant migration to the cities by people seeking greater working opportunities, this increases the pressure on existing infrastructure enormously, public transport is used extensively and roads are constantly choked.

With an increase in interest from overseas investors seeking to deal with a large well-educated English speaking people, India is encouraging global players to invest in much needed infrastructure.  Whilst India has many challenges regarding their exploding population, their poverty levels, unemployment and the urban/rural divide, there are changes afoot and significant economic progress is being made.  One of their more recent challenges with international investments and exciting developments is that there is not always a meeting of the minds between environmentalists and planners.  But in the 21st century that is not a challenge for India alone.

Newcastle Financial Investment Insight

Images of the Bandra-Worli sea link which joins two peninsulars in Mumbai across the Arabian Sea.  The bridge was totally opened in 2010

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