For the fifth year in a row, all the major powerhouse emerging markets have performed better in every way than was expected just one year earlier. For example, at the start of 2007, Chinese and Indian GDP were expected to grow by 9.5% and 7.4%, but by the autumn, those figures had been revised upwards to 10.4% and 8.4% respectively. In fact, over the last five years, economists have been forced to regularly increase their predictions, with the forecast for 2026 now more than 70% higher than comparable forecasts published in 2002. China and India are already changing the face of global economics and are on their way to becoming the most dominant world economies in the years to come. In just a few years, China has jumped from being the seventh largest world economy to the third largest today, and by 2040, it is expected to regain the premier economic status it held centuries ago.
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China’s recent economic acceleration is not only due to record exports and investments, but more importantly, is the result of strong domestic private consumption.
A burgeoning economy, higher disposable income, a demographic shift towards large cities and the growing importance of a younger generation of consumers, combined with a government focus on establishing consumer spending as the main driver of economic growth, have already yielded a sizeable increase in consumer spending. In fact, Chinese households have increased their intake of consumer goods by 15% year-on-year for the last two years.
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However, today’s consumer spending in China is only a hint of what is expected to come: there will soon be a massive wave of middle-class consumers that will push spending to new heights. This wave will be created by the convergence of six phenomena: (1) a burgeoning economy, (2) rapid urbanisation, (3) more, higher paying jobs in urban areas, (4) the gradual relaxation of attitudes in urban Chinese society to savings, (5) the increasing value of time and (6) the likely favourable exchange rate. Air transport will benefit from this demographic shift.
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India and China are evolving into vibrant marketplaces with a dynamic consumer base, which is expected to become three times larger than that of North America and Europe combined, by 2026. In time, the influx of these new consumers from emerging countries will prove crucial to the world economy, as private consumption in developed countries reduces. With levels of consumerism set to ease in developed regions, the world economy will increasingly rely on China and India as an alternative source of demand. This may create an asynchronous economic cycle, with the US slowing before Europe and other developed countries, followed by China and India, a pattern that may lessen the cyclical nature of the world economy and indeed associated business cycles.
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India has recently joined the world’s top ten economies and will no doubt be among the top five by 2026. The source of its economic growth differs from China’s, but the pace achieved since economic reform is identical.
Services and information technology remain the backbone of India’s economy, with manufacturing small, but growing fast. India’s private spending contributes 60% to its GDP, a figure closer to developed than to emerging economies.
It was in 1990, 12 years after China, that India started the reforms that led to its emergence as a potent economic power. Since then, it would appear that the Indian economy, exports and transportation development have closely followed Chinese development, only with a 12-year interval. India’s GDP per capita was four times that of China at the beginning of the reforms, but with very similar growth. India’s exports, measured as a percentage of GDP, are also growing in a very similar fashion to China, with the same 12-year gap linked to the start of their reforms. India’s export of precious stones and clothes has grown as fast as China’s export of electronics.
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As income rises in emerging markets, spending patterns evolve from basic needs, such as food, clothing, housing and utilities, to more discretionary items such as recreation, education, electronics and transportation. The urban populations of China and India are moving to spending on discretionary consumer items more quickly than any
previous emerging countries. Urban spending on transportation is clearly one of the fastest-growing categories, representing an increasing share of spending by Chinese and Indian households.

Rapid urbanisation, better jobs in large cities and the absence of an established country-wide  road transportation network have facilitated the rapid penetration of air
transport into China and India. In the same way that cell phone technology leap-frogged the development of land based telecommunication lines, air transport has been usurping a greater share from road or rail networks, which still require significant amounts of time and capital to develop fully. This has especially been the case for China and India due to their relative size and topography. For example, it takes up to 24 hours to travel from Delhi to Mumbai by train, yet it currently takes only 90 minutes to fly, for the same price.
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