After hitting 8,000 (in 2009) in
the aftermath of the global financial crisis, the Sensex has rebounded to cruise past the 20,000
levels and is tad away from its earlier highs of 21,000 achieved in
January 2008. While most of the global equity markets have bounced back from
their low levels in 2009, Indian markets are amongst the few that have witnessed
a sharp rebound and are closer to their 2007-08 peak levels. This surge in
the Indian markets rests on two facets strong fundamentals and liquidity
inflows.
The global economic activity, which had dipped in 2009, is on its path
of recovery. However, while there are still concerns on a full blown recovery for
the developed world, the developing economies are back on to their earlier
growth trajectory and are growing at a pace higher than the developed world.
Going forward, the growth in the developed world, which has grown at back of
innovation, would continue to lag the growth in the developing economies,
as the growth of innovation is lower. For instance, US per capita income
has more or less grown at an average real rate of about 2% per annum since
the past 30 years, which can be taken as a good benchmark for
innovation-led growth.
Developing economies, on other hand, which lag significantly behind
the developed world in productivity levels would grow at higher pace than the
developed world on back of copy of innovation. Thus, on back of huge
disparity that exists between the developed and developing economies on the
productivity front, along with the favorable demographics and the high savings rates,
the developing economies are well set to surpass their historical growth
rates and thus be at the forefront of the global economic growth for years to
come. Moreover, unlike during the 1997 Asian crisis, the developing economies
now boost of current a/c surplus in comparison to the current account deficit in
the developed world, thus warding off risks emanating from appreciation of the
currency, favoring investments into the emerging world.
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