Within the frameworks of the Gaidar Forum organized in Moscow by the Russian Presidential Academy of National Economy and Public Administration, Dr. Binod Singh Ajatshatru, Director of BRICS Institute (New Delhi), shared with Invest Foresight, the event’s strategic media partner, his opinion of the global economic trends in 2020 and beyond and outlined the most likely developments.
Geopolitical background: When it comes to economy overall I am an optimist, but the current geopolitical situation has made the growth scenario appear in a flux. The major power rivalry in different regions will have a negative impact on various sectors except the military industrial sector. A major war is not imminent but sporadic conflict in some regions will slowdown the cross border investment and energy prices will fluctuate more often. We are keeping our fingers crossed for a stormy winter.
Outlook 2020: It is almost a decade when we all got united under the aegis to G20 and BRICS to make a collective effort to rescue the global finance from the crisis. The stimulus package indeed helped many countries including US, China, Russia and India to register a high economic growth. But after ten years I think we are back to the same square where there is a demand for new stimulus package to break the current momentum of low investment and reduced economic growth in major countries.
Sectoral trends: As we are already in the age of industry 4.0, where technology and innovation will lead the economic growth, BRICS countries are having a divergent path of technological progress and catching up in innovation, where China is the only outliner and has done exceptionally well in catching-up with the leading economies in the field of AI and High-tech manufacturing. Russia has surprisingly done excellent in agro sector and now it’s a major exporter of agro products. India has been on zigzag path with some sectors doing excellent but still lagging behind in manufacturing and high-tech industry. Brazil has just emerged out of political mess and now back on the normal growth path. South Africa is highly divided over both political and economic issues and we expect in 2020 there will be some positive trend on all fronts. On overall, there is a demand that BRICS countries need to open their markets further and create an environment for fair competition between foreign and domestic firms. Following are the sunrise sectors where BRICS counties enjoy market advantages and will dominate the global economy in this decade:
AI and affordable healthcare: In this decade, the use of AI and IoT will reach exponential level in Korea, Japan and other developed countries. The emerging countries such as BRICS nations will see a phenomenal growth in this sector as they adopt to latest technology and create smart homes and smart cities.
Blockchain technology and payment systems: In the coming years, application of Blockchain is a disruptive technology which is going to redefine the global financial system. Despite the launch of Libra, a digital currency by Facebook, has been currently asked to put on hold, countries like China, Japan, Korea, Saudi Arabia and some European nations are going ahead with some type of digital currencies. Blockchain technology is already a trillion dollar industry, and it’s growing at a good pace to redefine the way global financial system works.
Climate change technology: While global warming is a troubling trend, and while there are good reasons to reduce carbon emissions, climate change will give rise to several new industries to contain and minimize the damage caused by it. Although late, but Russia has recently come out with its policy of utilizing the positive effects of climate change. Recently, Kremlin website recognized global heating as a problem but lists ‘positive’ economic effects. Russia is one of the most vulnerable countries to climate change, with vast Arctic regions and infrastructure built over permafrost. Hence, climate change is both a challenge and also an opportunity to make innovations in our way of living and the way we consume limited resources. On the energy and transport sector, companies like Tesla and BYD will become one of the largest in the world counting on their E-vehicles and other automated products currently in labs.
Data mining industry: Companies working in the area of ensuring data security will see phenomenal growth in their business such as Kaspersky Lab in Russia. In the news and media industry there will be use of blockchain technology to check the fake news alert, platforms like Facebook and Google will use innovative technology to check into complains of foreign interference in domestic politics, etc. BRICS countries generate huge amount of data which is still partially regulated. As the regulation of data mining and sharing comes into effect, it will certainly become a profitable industry for many companies. Cross-border sharing of data will certainly contribute to new innovation in healthcare and related sectors. At the same time, the risk of data leakage will delay the process and much work is required to arrive at a censuses for cross-border data sharing industry.
E-commerce: The world economy was never as integrated as now and the concept of platform economy is redefining our shopping experience. E-commerce in China has reached to manic level and other countries will follow the trend, especially India which has a huge market but yet uncovered by e-commerce due to logistics issues. Only 15% of Indians now buy online whereas in China it is as high as 70%. Since the government has made many changes to FDI laws in this sector, we expect that India will attract huge amount of FDI in this sector and will also see many homegrown companies going global in this sector. Given the market demand in BRICS countries, I am convinced that the coming decade will be a decade for e-commerce industry.
Food processing: How to feed 8 bln people on this planet will be always a major concern for countries. This industry is also linked to climate change. Each country is focusing on sustainable development, therefore agriculture and food processing industry will have to adopt o latest technology in order to reduce the carbon emission. Russia, India and China has enormous opportunity in this sector and will be able to make new innovations in the area of food preservations and making organic foods affordable and transportable for long distances. New companies will join this sector and make food processing industry as of the most attractive sector in global economy.
Healthcare industry: The last but not the least is the affordable healthcare with the help of new technology. Health care is still unaffordable for many people in many parts of the world due to high cost of medicine and treatment. BRICS counties stand to benefit more from innovation in this sector as better and efficient healthcare can reach to more and more people in remotest part of these countries. If governments provide some subsidy and universal coverage for healthcare in their countries, many more companies will come to join this business and we already see many new startups in India and China who are reddening the way healthcare services are delivered. In this decade, it will become a global integrated industry due to sharing of cross-border healthcare data and consulting with doctors across the boundaries.