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Sunday, October 22, 2006

The Rise Of The Power Of India Corporates

I recently wrote about the discernible shift - where Asia Now chinese companies are on the prowl and India inc is stepping up overseas acquisition – the globalization effect is in full swing. Courtesy of Rajesh saw this note on Asia, which brings out the fact that in the the past five years America has accounted for only 13% of global real GDP growth, using purchasing-power parity (PPP) weights.The real driver of the world economy has been Asia, which has accounted for over half of the world's growth since 2001. Even in current dollar terms, rather than PPP, Asia's 21% contribution to the increase in world GDP exceeded America's 19%. But current dollar figures understate Asia's weight in the world, because in China and other poor countries things like housing and domestic services are much cheaper than in rich countries, so a dollar of spending buys a lot more.
So its only a logical step in this journey that Asian companies begin to acquire western assets. Tata's now want to buy more post their Corus Acquisition. As the Economist notes, what is noteworthy about many of the firms is that the root of their success is not India's obvious competitive advantage: its vast, low-cost labour force. In the IT and outsourcing industries, lower salaries for college graduates are an important reason behind Indian firms' rapid growth(This is for those who forget the quality and process edge). But in manufacturing the stars tend to be experts in automated, capital-intensive production. Bosses who have flourished in such businesses in India, with its poor infrastructure and still-daunting regulatory environment, understandably feel confident that they have lessons to teach their new purchases in other countries. Truly the world is changing - faster than many could recognise.

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