Hope you are strong in this wind...and wind always passes.
Actually there are problems with our growth calculations. If someone is overeating beyond limits, then with illness going to hospitals for treatment giving money to doctors, Happy Doctors spend even more and make more people happy. But eventually some day, overeater will understand the wisdom or fell terminally ill unable to eat anymore except medicines.
But the problem is that our economists call overeating as consumption led growth and stoppage of overeating as coming recession. Although we can see that stopping of overeating is nothing but a "self correcting" phase. So here we are; recession most of the time is a correcting phenomenon of misallocation of productive resources.
World just forgot that unnaturally high China growth was not sustainable but yet they were going overboard in creating over capacities for fulfilling Chinese thirst for commodities which once accounted for 50% of global demand. Now when China has realized or forced to curtail this unnecessary eating, others who have set up massive scales particularly for Chinese are shivering with fear. But their fears are justified and there is fear that their fears may eventually come true.
As I have explained in earlier post on FED rising rates; I am not counting much of this. But for some countries who are heavily dependent on Chinese story, future may be very uncertain. The uncertainty is whether countries like India and some parts of Africa can provide support to falling commodity prices. And I feel they will. Although share of consumption in Indian GDP is relatively high at around 70% but I feel this is because of low levels of Investments. India is short of investments and as India is a place of disparities; so rich people are consuming much more and poor people are just surviving on Rice and Wheat. Proof is per capita Income in india which is very poor. We stand at around number 143 in per capita income as per IMF in 2014. We earn $ 1600 per head, with china at $ 7600, USA at $ 55000 and Luxembeourg at $ 110000. Pakistan is at $ 1343!! Do we really know what is growth and consumption with this paltry $ 1600 per head per year?
Do we have the right to fear that our Consumption may slow down? Do we really consume? Our per capita consumption of milk, meat, eggs, vegetables, cheese is tiny as compared to giants like USA; we fare badly even with global average. You think we are nation of milk, per capita milk and milk products usage per year is 250 Kg in USA, 240 Kg in UK, Pakistan at 160 Kg. we are around 70-80 kg even below global average of 110 Kg!! Each Indian gets to eat about 185 kg of grain in a year, while a US citizen consumes 1100 kg. In the US, about 50 kg poultry meat is consumed every year by each person, compared to just 3-4 kg in India.
So should we fear? No, not at all. Instead India can utilize this commodity fall to augment its investment drive which is moving very slowly. India is going to gain from this correction in global market. Stock markets are a different thing, where in spite of economic growth, it can still fall if domestic investors are not investing in stocks and foreign investors are looking for safe avenues. This is something which is just happening in India.
So just don’t fear…flex the muscles in your leg and stand firmly at the ground. Wind is going to pass.