Between 2000-2010, economic centre of gravity shifted from the West at 140km a year!
Asia used to account for around two-thirds of global GDP until 1500. Then, after 2,000 years of a relatively stable economic centre of gravity in the East, the industrialisation and urbanisation of the West wrought rapid changes in the world?s economic map, decisively tilting the balance towards Europe and then the US by the middle of the 20th century. Around the 1980s, the balance starting shifting again with the rise of Japan. But the fastest-ever change in global economic balance has taken place over the last decade. Industrialisation and urbanisation in China is taking place at 100 times the scale and 10 times the speed at which it took place in the UK. As growth is increasingly powered by cities in the emerging economies of the East and the South, infrastructure investment will be pivotal and companies will need to understand diverse target markets in forensic detail. This is the basic crux of the McKinsey Global Institute?s new report, Urban World: Cities and the rise of the consuming class. And this is not news. What is new, however, is the calculation that between 2000-2010 the world?s economic centre of gravity has shifted about 30% faster than in the period after World War II when global GDP shifted from Europe to the US?at 140km per year!
We haven?t verified the calculations ourselves but it must be noted that they have attracted some sniggers. Still, India should take note of some of the report?s details. For example, 440 emerging market cities will account for 47% of expected global GDP growth between 2010-2025. There are 28 Indian middleweight cities in the Emerging 440, including IT hub Bangalore, auto and pharma hub Pune, port city Kochi and textile centre Surat. McKinsey is not alone in expecting that India?s cities will generate half its GDP growth by 2025. The report concludes, however, that our cities have really under-invested in critical infrastructure. To keep pace with their growing populations, they need $1.2 trillion in capital expenditure to 2030?eight times their spending today!