This morning I happened to read an article by Todd Guild of McKinsey & Co., Tokyo. Here he gives insight about Asian consumer and market, it being one the toughest of the markets to penetrate because of cultural, ethnic, political and social diversity. Cultural and economic disparities make it more difficult for businesses to understand the consumer and pose a huge challenge facing them. China and India have been harbinger as world gets out of and what has been touted as one the worst downturn ever. Japan was also among the first to recover as compared to other developed economies. Private consumption to GDP ratio was considerably reduced in US during 2007-08 was reduced considerably and hence exporter like India and China had to think of new ways to cope with it. Then came concept of intraregional commerce which was a solution to a problem give n above i.e. by trading among themselves. But if this has to be achieved successfully then the Private consumption to GDP ratio in Asian countries needs to be increased from a mere 36%. Among all these discussion Mr. Guild compared USA and Asia as a growth hub on various parameters which I am listing below.
At the End of 2008 –
Parameter | Asia | USA |
GDP | < $14 trillion | $14 trillion |
Private consumption-GDP ratio | 0.50 | .072 |
Spending | 3 billion people spend about $7 trillion | 300 million spend more than $10 trillion |
Before putting my point of view I must ask you to point out anything I am missing in my observation or am I being naive in my viewpoint. Dollar, being the standard currency of the world, takes care of all the macroeconomic terms pertaining to each and every country of the world. But isn't it an unjust comparison is being made in, for example, Asia and USA across various parameters. Value of currency of the countries in Asia is way less that currency of USA. Let us consider an example of India, an average graduate engineer earns about $60,000 per annum provided he gets a decent job and in India a person with similar qualification world earn around 300k per annum which amounts to a mere $6000 per annum. Now there is huge 900% difference between the two values and two persons of similar living standards. If such is the earning difference how would anyone expect the spending to be in parity even if India becomes a developed nation. An average person with the salary mention above can spend $4000 per month which is almost equal to a per annum Indian salary. If for a developing nation being developed means filling the gap between parameters when campared with USA or for that matter any developed nation, it becomes more daunting and challenging than it would have been in case of, which i would call, a just currency.
This was my one of the main concerns that remains to be addressed. According to me, a standard figure is one which is just to everyone and hence should be equidistant from the value of each and every currency. A value that can candidly compare each and every aspect of each and every country of the world, a value around which a forex market should revolve. Still it only remains to be a view point and an observation which came very late though but I think is worth to be discussed about.
