While I try to post once a month, I have been tied up over the last few months with various life events (work, family, exam, etc.)! A lot has happened since and I hope to give a macro view of the world over the last few months and thoughts from attending global summits through the year…Enjoy!
We are more than halfway into 2011 and to say that is has been an interesting first half would be an understatement. Significant global events have continued to capture the minds and efforts of global leaders, as they try to balance their economic and political landscape. From revolutions/regime changes in the Middle East & Africa to natural disasters in Japan & the US to the death of the World’s most dangerous man in Pakistan. What’s more interesting is that the leaders are still trying to find solutions to the financial and sovereign debt crisis of the last two years. The bifurcation between the developed and developing world remains despite the liberalization of the developing economies.
- Currency Fluctuations: Over the last two years, currencies have experienced greater than 20% swings (time for devaluation?… ask anyone in India (80s), Thailand (90s) or Argentina (00s) what that felt like. However, this time it’s not just the developing countries)
- Commodities Volatility: We have seen the price of oil go up over $150 back down to $40 and then back up again to $100. You may wonder what games are being played by the big boys!
- Inflation: 20% food inflation in the developing world! Let’s hope their incomes rise in line with that (#keepondreaming)
- Anemic Growth: Regardless of the stimulus, the developed world is barely hanging on to positive growth. The developing world is growing steadily, you may think….just refer to the previous point (on inflation)
- Price Discovery: With no clear direction to currencies, commodities, inflation, gdp growth – how do you value companies? Well…we might as well leave that to the ‘efficient’ equity markets to figure that one out.
- Political Gridlock: What does all of the above lead to – you guessed it – inability of political parties to agree to the right solution leading to inaction and further crises.
It’s not all doom and gloom. In the midst of the bleak global political and economic landscape, there is some reason to cheer. I was fortunate to attend two events that highlight some parts of the world that bring some shine to the global picture. In context of the exciting growth prevalent in India, it is important to note that growth in the country is regionalized. This is due to several factors like state government regulations, governmental leadership, state infrastructure to name a few. In early January, the State of Gujarat hosted its 5th bi-annual Vibrant Gujarat Global Summit. For those that live in India, you may be aware of the common understanding that whatever the GDP growth in India, add 2-3 percentage points to that and you get the GDP growth rate for Gujarat. Now that is impressive. The event had a global audience and it attracted the top industrialists of India. This is reflective of the leadership of the state (Narendra Modi) and much praise was showered on him…Anil Ambani, while addressing the audience, quoted his dad’s (Dhirubhai Ambani) initial thoughts of Mr. Modi – “Laambo race no ghodo che” – loose translation (He’s a horse that runs long races and wins). As India continues to attract FDI, it is certain that companies, both domestic and foreign, will look to invest capital in the state of Gujarat.
Each Vibrant Gujarat summit has a partner country sponsor. This year (2011), it was Canada. Canada continues to capitalize on its position (the least scathed by the global recession of G7 countries) to strengthen its relevance on the global stage. For the first time in Canada, Bloomberg hosted an Economic Summit in Toronto on ‘Canada’s Way Forward’. As an attendee, I got to hear, first hand, Canada’s top leaders discuss a range of topics – Canada’s fiscal position, the strength of its banking system, the hunt for global assets, its view on foreign investment and Chinese partnership. Canada is known for its immigration, stable banking system, resource rich economy (and these days its strong currency) – the ideal ingredients for a safe-haven for parking excess cash. The real estate prices in Toronto will not argue with that fact. While, there is inherent built-up local demand, most realtors would agree that a significant number of their clients are foreigners. According to one seasoned realtor, “Anytime geopolitical issues arise in Korea, Hong Kong, Middle East or Africa, there seems to be an increase in real estate activity in Canada.” Granted, this a general statement, with no substantiated metrics to prove the correlation but the thought does make intuitive sense. With a resilient economy, stable (majority Tory) government and a high standard of living, it is no doubt Canadian cities rank among the best in the World. In a recent study, Toronto ranked second in the World’s best cities for business, life & innovation.
These events come on the backdrop of increasing ties between India and Canada. The two countries continue to build relations and strengthen trade between them. It was a privilege to hear the thoughts of the “who’s who” of both India and Canada. In Gandhinagar, it was Mukesh & Anil Ambani, Ratan Tata, Prashant Ruia, Arvind Mahindra, Adi Godrej and the list goes on. In Toronto, the panelists included Peter Munk, Frank Stronach, James Leech, and Jim Flaherty, to name a few. As the cloud of uncertainty lingers, you can be rest assured that the new Silk Road from IN to CA will continue to get paved.