China Watch Blog

China Watch Blog reports that India is expected to grow at 6.1 per cent in calendar year (CY) 2012, similar to the pace recorded in the fourth quarter of 2011.

An Economic Times report quoted the Ernst & Young’s quarterly Rapid Growth Markets Forecast (RGMF) as saying that growth should be picking up in H2, 2012, provided the global economy does not experience a further shock.

Over the medium term, we expect a strong recovery in investment, which will help lift overall GDP growth over 9 per cent by 2014, it said.

“India’s domestic demand-driven growth model is acting as a catalyst for attracting foreign investments into the country.

Although the ongoing global uncertainty may have prompted global investors to become more cautious, India’s inherent advantages and proven resilience to counter-act macroeconomic challenges generally outweighs these concerns,” Ernst & Young India Partner & India Markets Leader Farokh Balsara said.

According to the forecast, in India, the biggest development will be in the lower middle class with the number of households with disposable income of USD 5,000 to USD 15,000 rising to around 150 million in 2020 from just under 100 million now. In particular, this represents opportunities for companies in the developed economy such as US and Europe for investments.

While the purchasing managers Index (PMI) and car sales data in January and February of 2012 have hinted at a stronger growth dynamic for India, the country will need to address rising inflation, which is still high.

As per the forecast, the country’s central bank will not be in a position to cut interest rates until core inflation (excluding food) is on a clear downtrend and that may still be some months off, particularly as the economy has recently gained considerable momentum.

The wholesale price inflation should trend down through 2012 to about 5 per cent in Q4, reflecting the lagged impact of the weaker economy and lower food prices, the forecast said.

China Watch Blog has learnt that Japanese companies have lost further ground to Chinese and South Korean companies in winning overseas infrastructure projects, dealing a blow to a planned pillar of Japan’s economic growth, the Japan trade ministry said.

From 2005 to 2010, Japanese companies won orders for infrastructure abroad, such as railways and power plants, worth around $20 billion (1.65 trillion yen) a year. But in 2010, the figure for South Korea stood at $64.5 billion while that for China was $134.4 billion. Both numbers were four times the levels five years earlier.

Those statistics were revealed by the Japan Ministry of Economy, Trade and Industry at a subcommittee meeting of the Industrial Structure Council on April 5, the Asahi Shimbun reported.

The council plans to put together a report in November to strengthen Japan’s competitiveness in exporting infrastructure. It is expected to enter discussions on a policy of nuclear-plant exports in September.

Total demand for infrastructure in fast-growing Asia and Africa has expanded to around $1 trillion a year, about three times the level a decade earlier.

For deals worth more than $1 billion in 2010, South Korea won 14 orders, including power plant construction. Japan secured just three contracts, including natural-gas processing equipment.

Region by region, Japan is facing an uphill battle.

In the value of orders for 2010, South Korea ranked second in the Middle East. China was tops in Asia and Africa. Japan, meanwhile, slipped to 11th place in Africa from fourth in 2002 and saw its standing drop in all the three regions.

Chinese and South Korean companies offer lower prices compared with Japanese firms, due mainly to lower wages in their countries.

The strong yen has also led to even higher prices offered by Japanese companies.