The rupee has weakened by 17.5pct on a year to date basis, we feel that most of the correction could be nearing an end as the 20pct targeted weakness could soon be complete. The weakness also seem to be now in line with a REER of 100 and thus could seen some consolidation once the 20pct target is reached i.e. 186.00.
India’s economy will overtake the US by 2030. And will be the world’s youngest major economy.
In just 12 years, India will undergo a startling transformation…
By 2030, around 77% of Indians will be under the age of 44… and most of those will be under 25. The country will also have more than 1 billion internet users…
Every second, three or more Indians go online for the first time. And by 2030 India will be a middle-class Nation. Consumer spending will quadruple. Rising to nearly $5.7 trillion in 2030.
But the economy still faces major challenges. By 2022, more than half of Indian workers will need reskilling. And it still has some of the most polluted cities in the world.
India will need to ensure its fast-growing economy is inclusive.
Asian giants securely heading to overtake America
A new world economic order is in the making, with today’s emerging markets, including India, at the heart of it.
India is likely to become the world’s second-largest economy by 2030, next only to China and overtaking the US, according to Standard Charted Bank’s long-term forecast released on January 2008. The UK-based multinational bank also predicts that based on nominal GDP using purchasing power parity exchange rates, China will overtake the US by 2020.
Top 10 countries by nominal GDP in 2020.
Current emerging markets will likely make up the majority of the biggest economies by 2030.
Standard Chartered Bank had raised growth forecast for China and India from its projections in 2013. “India will likely be the main mover, with its trend growth accelerating to 7.8% by the 2020s partly due to ongoing reforms, including the introduction of a National Goods and Services Tax (GST) and the Indian bankruptcy code (IBC),” says the report.
Launched in 2017, the GST attempts to simplify India’s cumbersome tax regime, while the IBC, rolled out in 2016 would strengthen the country’s bankruptcy and insolvency laws.
“Our long-term growth forecasts are underpinned by one key principle: countries’ share of world GDP should eventually coverage with their share of the world’s population, driven by the convergence of per-capita GDP between advanced and emerging economies,” the report said.
Jobs, jobs, jobs
Aging populations are likely to weight on global growth, but India, home to the world’s largest group of young people, will remain unfazed, Standard Chartered Bank notes. Half of the country’s population is under the age of 25.
The bank expects “the rising aspirations of a young population to continue to support consumerism in India’s economy.”
But a young demographic also creates a demand for massive employment. About 100 million new jobs must be created in the manufacturing and services sector by 2030, according to the report. To achieve this, it says, the government needs to close a widening skills gap, raise the participation of women in the workforce, and ease labor laws.
“India needs to train circa 10 million people annually, but currently has the capacity to train just 4.5 million,” the report says.
It also calls for reform to boost spending on infrastructure and reduce growing economic inequality in the country.
Are you optimistic for India’s future?
By : Cameron Blake
Source: Standard Chartered; Based on predicted nominal GDP
An efficient, modern and clean public transport connectivity is essential for a country, before we think of isolated link of Monorails link without public transport network system to fill the gap. Public investment in such assets is now becoming essential given the use of private transport and the rising cost of fuel imports. It is estimated that the split of the public passenger transport (bus and railways) in Sri Lanka has reduced from 65 percent in 2010 to 44 percent in 2018 leading to urban traffic congestion (Figure-1).
The estimated cost of this shift has increased from LKR 400 million in 2011 to LKR 2.2 billion in 2018. The worst impact of ad-hoc pricing policy on private motor vehicles (Motorcars, three wheelers and motorcycles) and fuel in 2015 illustrated by the operational vehicle fleet increased from 2.52 million in 2010 to 5.70 million in 2018. It should be noted that operational fleet of 3.90 million in 2014 increased and to 4.53 million in 2015 which is a 16 percent annual increase which was also the highest annual incise in the Sri Lankan history as a result of low fuel pricing and reduction in import tariffs on vehicles in 2015.
Factors Displacing Public Transport
Many considerations have influenced the displacement of public transport and among them,
01. The fuel pricing reduction that was introduced in 2015 witnessed the increase in petrol consumption of the transport sector from 885 million litres in 2014 to 1,329 million litres in 2015 accounting for a 50 percent annual increase, which encouraged increased use of private vehicles (Figure-2). The increase of private vehicles on the roads reduced the average vehicle speed in Colombo Metropolitan Area from 21 km per hour in 2010 to 8.2 km per hour in 2018 (main road corridors of CMA).
02. The vehicle taxation policy too increased the importation of hybrids from 115, 215 in 2011 to 172,434 in 2018 which amounts to 33 percent of the operational motor car fleet. The operated vehicle kms also increased by four fold from 2011 to 2018.
03. What is noticeable is that public transportation as provided by the railway and passenger bus services, has not improved in their service quality in keeping with per capita GDP growth during the same period.
All these are inherent weaknesses in Sri Lanka’s economic management thought process which gives rise to several short-term problems.
01. High cost of fuel and vehicle imports costing USD 1,625 million in 2018 of the reported in trade deficit of USD 10, 800 million in 2018.
02. The rising import cost and falling reserves were the two major challenges in managing foreign exchange.
03. Heavy urban traffic costing travel time and fuel waste thereby impacting labour productivity.
In the backdrop of a looming BOP crisis, despite the low fuel prices since 2014, the government in 2018 introduced import restrictions by way of imposing 200 percent cash deposit margins and high tariff based on vehicle weight.
Therefore what is needed in this hour, is an innovative package of solutions to be executed at national level for transport management through effective fiscal policies for private motorist, and fuel prices based on the reflective economic cost for the private mode of transport. Those who use road network space during peak hours should pay the road user cost, determined by the cost of the given trip. Further, the public transport system such as Bus Rapid Transport Network (BRT), and the feeder mode of public transport should be linked to high demand BRT corridors and railway networks with facilities for parking and using public transport to reach their destinations. In addition, an integrated traffic management system for urban road networks with less human intervention should be formulated.
The BRT, and high density rail solution should be considered only if there 35,000 passenger movements in a given corridor. If the passenger movements are between 15,000 to 35,000 then the BRT and corridors with less than 10,000 passenger movement should be provide appropriate modes of public transport systems. It is utmost urgent to have a transport hub to facilitate with network improvement to provide parking facilities for private motorists to switch to public transport system. The National Road network should also be improved based of the demand of the public transport network.