Brilliant diagnostics

The Rise And Fall Of Nations by Ruchir Sharma Penguin Books; Price: Rs.799; Pages: 464 For the Indian economy with its pathetic 2 percent share of international trade, the global financial crisis of 2008 triggered by the subprime mortgages investment boom in the US, wasn’t a big deal. The economy recorded 8.4 percent GDP growth in the year 2008-09 under the watch of the Congress-led UPA government. But according to Ruchir Sharma, chief global strategist and head of emerging markets at the US-based Morgan Stanley Investment Management which manages $272 billion on behalf of cash-rich pension funds, investment banks and high net worth individuals in the US in high-returns emerging nations, it marked the end of an era of sustained optimism which spurred huge transnational capital flows. “After surging for more than three decades, flows of capital reached a historic peak of $9 trillion and a 16 percent share of the global economy in 2007, then declined to $1.2 trillion or 2 percent of the global economy — the same share as they represented in 1980,” writes Sharma in his engaging second global bestseller after Breakout Nations: In Pursuit of the Next Economic Miracles (2012) which was highly recommended on these pages (EW August 2012).  The basic proposition of this well-researched and engagingly narrated oeuvre is that the era of 7 percent plus annual GDP growth rates in hitherto highly-fancied emerging countries (China, India, Brazil) is over for the foreseeable future (defined as five years), and that in the developed OECD countries 2.5 percent annual economic growth will be a good achievement. The skill of the serious mega-bucks investor is to read tell-tale signs to identify well-managed rising economies which will yield high returns to foreign (and domestic) investors and lead global recovery. In this book Sharma presents his ten rules of diagnosing whether a nation is on the rise or decline. (i) Is its talent pool growing? (ii) Is the nation ready to back economic reforms/reformers? (iii) Is income and wealth inequality threatening growth? (iv) Is the government meddling more or less? (v) Is the country making the most of its geographic location? (vi) Is investment as share of the economy rising or falling? (vii) Is inflation high or low? (viii) Does the country ‘feel’ cheap or expensive? (ix) Is debt growing faster or slower than the economy? (x) How is the country portrayed by global opinion makers? These are the metrics which the author — a practising investor in emerging economies — applies to determine whether a country is on the road to growth and prosperity, or going downhill. The BJP-led NDA coalition government in Delhi and governments in all state capitals are desperate to attract foreign investment to increase manufacturing output and create jobs for the 12 million youth entering the jobs market countrywide every year. This brilliantly argued book replete with statistical and exemplary evidence is an excellent assessment metric to ascertain whether they have positioned themselves to inspire confidence in big bucks foreign — and domestic…