At a time when the current global slump has left the economies of the developed world bleeding, it is the emerging economies that are seen as a ray of hope. Particularly, hopes are pinned on the Bric countries that are blessed with large consumer markets. It is evident by the recent remark made by Jim O? Neill, chief economist of Goldman Sachs group who had coined the word Bric, that the Bric consumer is going to rescue the world. Interestingly, among the four Bric countries, China and India are seen as big hopes for a simple reason that they have a huge number of domestic consumers. Raghuram Rajan, former chief economist at International Monetary Fund and currently the adviser to Prime Minister, was right when he gave a call to the export-oriented units in the country to look at domestic markets. Rajan had a reason when he said this as foreign markets were not likely to recover so soon.
Both countries, along with their peers in the developed ones, are faced with freeze on fresh recruitments and even lay-offs resulting in the deceleration in production and sliding purchasing power of their domestic consumers. Even though the governments of the two countries have taken a host of measures in recent past, including the announcement of stimulus packages, to win the confidence of their consumers, experts think these measures may not suffice and they argue that more measures would be required for the rescue of their economies. To make matters worse, the recent attack in Mumbai?the financial hub of India?has a lot to add to the woes of the economic growth of the country.
Same is the case with China which is also faced with various external problems. The suit lodged by the US against China at the World Trade Organisation, against China aiming at halting export subsidy programmes, was just one among them which has turned as a big blow for the fast emerging countries like China. Neill?s view has been endorsed to some extent by the recent MasterCard Worldwide Index of Consumer Confidence report which was released last week. As per the study, India and China are among the 14 countries that have shown optimism in consumer confidence and the trend is likely to continue till early 2009.
India?s current index score is 63.9 showing that consumers in India, though optimistic, are less so than they were six months (82.1) and a year ago (86.6). The score, slightly better than its historical average of 62.3, is India?s lowest score since 2004. Consumer sentiments have gone down on all five economic factors?employment, quality of life, regular income, stock market and the economy. Consumers are a lot less optimistic about quality of life (58.9 vs 87.7 six months ago) and employment (50.4 vs 75.1). Other indicators, while also having declined from six months ago, show optimism: economy (61.2 vs 80.9), regular income (73.5 vs 87.0) and stock market (75.5 vs 79.8).
Coming to China, consumers in the country continue to remain confident about the next six months despite the global financial crisis, though less so than they were six months ago (82.7) and a year ago (85.5). China?s current score of 76.6 is slightly ahead of its historical average of 75.6. Although optimistic, China?s consumers are clearly less optimistic about employment (72.8 vs 81.7 six months ago), economy (79.3 vs 84.4), regular income (86.0 vs 91.0) and quality of life (82.3 vs 85.3) than they were. China?s overall consumer confidence score was less bullish, driven by consumer sentiments about the stock market (62.7), declining from six months ago (71.2) and a year ago (72.9), says the report.
Reviewing the survey findings, Suman Bery, director-general, National Council for Applied Economic Research (NCAER) observed, ?With the European and US economies in a deepening recession, the world is looking to Asia, particularly developing Asia, to provide the locomotive for global demand?. In the past, the region?s households were more known for their propensity to save. Today the question is, are they in a mood to spend, and can they replace the American consumer whose wealth and income are both under assault, adds Bery.
Where India is concerned, the results show that consumer confidence in September 2008 is back to roughly its historic average after an extremely bullish phase over the past year. The results suggest that, as recently as September, Indian consumers still believed that India would be only mildly affected by the global downturn. Economic indicators released since then suggest that growth is slowing more rapidly than expected.
Keeping in view the current requirements of the country?s economy, India is considering one more stimulus package worth around Rs 20,000 crore to bail out the manufacturing companies and non-banking finance companies, the fund for which would be routed through the stressed asset stabilisation fund trust. On the similar lines, China was also planning to step-up employment and avoid job-cuts. Of late, China has offered a sum of $19 billion for financing those Taiwanese companies that had anchored their bases in the country, but had started showing their backs after feeling the pinch of global slump.