Emerging Market

Emerging Market

Subject : Economy

Context:

Uday Kotak has highlighted that India needs to manage inflation and growth well to break out from the EM tag and move towards its goal of becoming a standalone investment destination.

Emerging Market:

• An emerging market economy refers to a country that is in the process of developing its economy to become more advanced.
• Countries classified as emerging market economies are those with some, but not all, of the characteristics of a developed market.
• Features: 
  • Emerging market economies typically feature a unified currency, stock market, and banking system; they’re in the process of industrializing.
  • It strategies to move away from activities focused on agricultural and resource extraction toward industrial and manufacturing activities.
  • As an emerging market economy develops, it typically becomes more integrated with the global economy. That means it can have increased liquidity in local debt and equity markets, increased trade volume and foreign direct investment.
  • Their governments usually pursue deliberate industrial and trade strategies to encourage economic growth and industrialization.
    • These strategies include export led growth and import substituting industrialization.
• Emerging market economies make up 80% of the world’s population and almost 70% of the world’s GDP growth.
• Risks of Emerging Markets-Political instability, domestic infrastructure problems, currency volatility, and illiquid equity, lack highly developed market and regulatory institutions as those found in developed nations.
  • A key aspect of emerging market economies is that over time, they adopt reforms and institutions like those of modern developed countries. This promotes economic growth.
• Emerging market economies are classified in different ways by different observers.
• The International Monetary Fund (IMF) classifies 23 countries as emerging markets
• Morgan Stanley Capital International (MSCI) classifies 24 countries as emerging markets.
  • Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Russia, Qatar, South Africa, Taiwan, Thailand, Turkey and the United Arab Emirates
• Standard and Poor’s (S&P) classifies 23 countries
• FTSE Russell classifies 19 countries as emerging markets
• Dow Jones classifies 22 countries as emerging markets.
• BRICS countries represent 5 emerging markets with major economic growth and opportunities for investment—Brazil, Russia, India, China, and South Africa.