Tuesday, March 15, 2016

Ecosport, in India, sells on its own merits



In India, Ecosport sells on its own merits and not because of its Ford pedigree!

‪#‎MarketingGyanology‬
‪#‎IndianRoadie‬

Monday, March 14, 2016

The New Population Bomb



This time it is depopulation that will seal the fate of nations.
Though the global recovery is in its eighth year, there is not a single major region where economic growth has returned to its pre-crisis average. This expansion has been the weakest in post-war history , and economists have cited various reasons for it, including post-traumatic stress induced by the crisis of 2008.
While there is some merit in such explanations, they overlook the slowdown in working-age population growth, which is dampening economic growth everywhere. Until recently , population decline was concentrated in the developed world, but now, it is starting to hit even harder in big emerging countries.

This is a critical turning point.Worldwide, growth in the working-age population has collapsed, from an annual average of about 2% before 2005 to an annual average post-war low of around 1% this year. This one percentage point drop in population growth is likely to take a roughly equal chunk out of potential economic growth, which means that the world needs to reset its expectations.

The world as a whole should probably expect long-term GDP growth more in the range of 2.5% than the post-war average of 3.5%, and emerging economies should expect average growth more in the range of 3% than 4%. In China, even 6% growth is no longer a reasonable target, since its working age population is not just growing slowly , it is shrinking.

To clarify the economic impact of population decline, i looked at all the economies that have sustained a GDP growth rate of 6% for at least a decade since 1960, and found 56 of these “miracle“ cases. In three out of four such cases, the population of working age people ­ ages 15 to 64 ­ was growing at a pace of at least 2% a year. It is thus unlikely that an economy will grow faster than 6% a year if its working age population is growing at less than 2%.

Today , the population is growing this quickly in few countries. In the 1980s, 17 of the 20 largest emerging economies had a working age population growth rate above 2%, but that number fell steadily from 17 to just two, Nigeria and Saudi Arabia, in this decade. Through 2020, all the major emerging economies are projected to have working age population growth rates below the 2% mark, including India, Brazil, Mexico, Indonesia and Thailand.

In India, the working age population is expected to grow at an average rate of 1.5% over the next five years, which is below the average level associated with economic miracles. A world with fewer fast-growing populations has to expect fewer economic miracles. Even where the population is growing faster than 2%, including smaller economies like Kenya and Bangladesh, leaders cannot assume that population growth pays off automatically for the economy .

It pays off only if political leaders create the conditions necessary to attract investments and generate jobs.In the 1960s and 70s, high population growth in Africa, China and India led to famines, high unemployment, civil strife and fears of the “population bomb“.Rapid population growth is often a precondition for fast economic growth, but it never guarantees fast growth.

Since 1960, the average number of births per woman has fallen from 4.9 to 2.5 worldwide, and even more sharply in emerging countries. In India, it dropped from 5.9 to 2.5. This decline was fuelled by rising affluence and education among women, many of whom decided to put off having children to pursue a career, and by aggressive population control policies.

China introduced its one-child policy in the late 1970s, and saw its fertility rate drop from 3.9 in 1978 to 1.5 today .That is well below the “replacement rate“ of 2.1­ the rate required to keep the population stable. Already nearly half the people on earth live in one of the 83 countries where the fertility rate is below the replacement rate.

In three of the top 20 emerging countries, Poland, Russia and China, the working-age population is not just growing more slowly , it is already contracting. In 2015, the working age population shrank in China for the first time since the UN began keeping records in 1950.

Population decline is thus high on the list of reasons, alongside rising debts that amount to nearly 300% of GDP and a massive investment binge, to doubt that China can sustain rapid GDP growth.Beijing knows this, which is why it rescinded the one-child policy last year.

It is, however, too late to defuse the depopulation bomb. Countries with shrinking populations rarely post strong economic growth. Looking at nearly 200 countries since 1960, there are 698 cases in which data for both population growth and GDP growth is available for a full decade. Of these cases, there were 38 in which the working-age population was shrinking, and the average annual GDP growth rate for these countries was just 1.5%.

In only three minor cases ­ Portugal, Belarus and Georgia ­ did the country manage to sustain GDP growth of 6% or more. This suggests that demographics will all but rule out rapid economic growth not only in China, but in many major countries.

(The writer, Ruchir Joshi, is head of Emerging Markets, Morgan Stanley Investment Management. This article has been adapted from the latest issue of Foreign Affairs and published in The Times of India, Kolkata edition on 2016-03-14)