Two centuries ago India and China dominated the world economy and trade. Industrialization kicked off  in England in 19th century and then spread its wings to Northern Europe, North America, Japan and South East Asian Economies. While the Northern markets became consumption driven economies, the low income producing economies in the South became the manufacturing hub for the North. These changes in the latter half of the last century was  largely led by the financial sector innovations in the U.S.

Ironically, the financial crisis in 2008 coupled with the rapid growth of  China and India, the trade is now shifting its balance to ‘South producing for South’.

In a recent article written by Manas Chakravarty , which is based on the latest World Bank paper on the changing balance of trade, he focuses on the raising consumerism in Asia. With de-leveraging playing out across consumers, private sector and sooner or later from Governments across developed economies, consumption would raise in key southern markets like China and India. According to the World Bank paper , Asian consumers would replace the North American and  European consumers [ who currently consume 26% and 38% respectively] by contributing 59% of world consumption by 2030. See the chart in the link for more details.

It is interesting to note that the structure of these markets would be very different from the markets in the North. Being low income economies, the south will consume more food as their incomes raise. To be a producer for south, these southern countries would need to invest more in infrastructure, manufacturing  and hence the demand for commodities – be it agricultural or industrial along with energy will continue to increase.

The other change to watch out for is the price sensitive nature of the emerging economies that would lead to product standardization, which at times may lead to lower quality standards.

The large Asian economies like India do have the potential to become a new hub for consumption what with its domestic consumption, raising income levels and a favorable demographic dividend.