india and china - savings and spending patters
DESCRIPTION
India and China - Savings and Spending PattersTRANSCRIPT
SAVINGS AND CONSUMPTION PATTERN
-GROUP 9
INDIA VS CHINA
CONSUMPTION
• Consumption is the value of goods and services bought by people. Individual buying acts are aggregated over time and space
• Consumption is normally the largest GDP component• Before Economic Reforms, consumption comprised of
approx 52% of the GDP, however after reforms, it has grown its share to more than 62%
• Many persons judge the economic performance of their country mainly in terms of consumption level, which is distributed in the consumption of three categories of products, namely durable, nondurables and services
INDIA VS CHINA CONSUMPTION
• As emerging economies become more affluent, the size of the global middle class is expected to increase, from fewer than half a million in 1960 to 4 billion in 2030• The largest number will live in China and India• Both have large populations, industrializing
economies and rising living standards• Residential water and energy use, car ownership,
personal travel, food — notably meat and dairy — consumption, and waste generation all increase with income
CONSUMPTION DEPENDS ON….
• Value of goods and services bought• Largest GDP Component• Division of Consumption• Judging development level of a country• Determinants of consumption• Role of demographics in consumption• Impact on other variables• Business Cycle behaviour of Consumption
DIVISION OF CONSUMPTION
• Food• Clothing• Housing• Heating and energy• Health • Transport• Furniture and appliances• Communication• Education • Entertainment
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DETERMINANTS OF CONSUMPTION
• Current income• Cumulated Savings• Expectations of Future income
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IMPACT ON OTHER VARIABLES
• GDP• Savings• Imports• State Revenue
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HOUSEHOLD FINAL CONSUMPTION EXPENDITURE AS A % OF GDP
FOOD – AS % OF HOUSEHOLD CONSUMPTION EXPENDITURE
HEALTH – AS % OF HOUSEHOLD CONSUMPTION EXPENDITURE
HOUSING – AS %OF HOUSEHOLD CONSUMPTION EXPENDITURE
EDUCATION & RECREATION – AS % OF HOUSEHOLD CONSUMPTION EXPENDITURE
GOVERNMENT FINAL CONSUMPTION EXPENDITURE AS A % OF GDP
FINAL CONSUMPTION EXPENDITURE AS % OF GDP
CHINA CONSUMPTION PATTERN
2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
Household Final Consumption Expendi-ture as a % of GDP(Absolute)Government Final Consumption Ex-penditure as a % of GDP(Absolute)Final Consumption Expenditure as a % of GDP(Absolute)Gross National Income, US Dollars(Growth)
INDIA CONSUMPTION PATTERN
2001 2002 2003 2004 2005 2006 2007 2008 2009 20100
10
20
30
40
50
60
70
80
90
Household Final Consumption Expendi-ture as a % of GDP(Absolute)Government Final Consumption Ex-penditure as a % of GDP(Absolute)Final Consumption Expenditure as a % of GDP(Absolute)Gross National Income, US Dollars(Growth)
SAVINGS PATTERN
National Savings comprises of: • Household Savings
• Corporate Savings
• Government Saving
GROSS NATIONAL SAVINGS AS % OF GDP
GROSS HOUSEHOLD SAVINGS AS A % OF GDP
HOUSEHOLD SAVING RATE
FACTORS AFFECTING HOUSEHOLD SAVINGS
• Demographics
• Pension funds
• Private home ownership
• Precautionary Savings
• Cultural & Habit persistent
MEDIAN AGE
CORPORATE SAVING
HIGH CORPORATE SAVINGS IN CHINA
• Growing Economy makes retaining & reinvestment attractive
• No Dividend Policy
• Massive subsidies for land and energy reducing the input cost
• Economic and Demographic trends
• Corporate restructuring (1995-05)
• Agriculture share in GDP fell from 30% to10% during 1980-2008
• Agriculture share of total employment from 70% to 40%
• Urban population rose from 20 to 45%• One-child policy• Dependency dropped from 68 to 38% within a
generation resulting in working-age share of population from 60 to 74%
Large-scale labour migration from FARMS to FACTORIES at relatively LOW WAGE rate
CORPORATE RESTRUCTURING
• Large scale labour retrenchment – employemnt at state companies was halved• Small money losing companies were shut down
altogether
Enterprise based cradle-to-grave social safety net shrank rapidly resulted in a boost in corporate efficiency and thus corporate savings
REFERENCES
• Datamonitor.com• http://www.thehindubusinessline.com/features/
investment-world/article2077037.ece• www.mckinsey.com
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