Stages of Development

Its going to be another long post today ;-)

I am currently working on a project that studies the usage and availability of various commodities/metals around the world. One thing that I observed is that the usage of commodities/metals is higher in the richer countries. This of course is obvious.

However, another interesting observation (Not my own) is that there are five distinct stages of development for a country in its journey from being a "developing" country to a "developed" country ....

• Development of infrastructure
• Development of light manufacture
• Development of heavy manufacture
• Increased consumption of consumer goods
• Development of a service economy

Based upon the experiences of West Germany and Japan during the post-World War II period, and of the Republic of Korea in the period 1970-95, changes begin at roughly 5-year intervals and each of the stages takes about 20 years to complete - with stages overlapping.

Hmm, fairly basic stuff so far. However, this is the cool thing ....

During each stage of economic development, consumption of particular mineral commodities rises dramatically.

Stage I - Infrastructure

• Characterized by large increases in consumption of cement, crushed stone, and sand and gravel
• Cement consumption may rise from a few tens of kilograms per person per year to 0.5 to 1 ton of cement per person per year.

Stage II - Light Manufacturing

• Consumption of copper may increase from less than a kilogram per person per year to around 10 kilograms per person per year.

Stage III - Heavy Manufacturing

• Consumption of aluminum, iron ore, and steel rises.
• Aluminum consumption typically increases from less than a kilogram per person per year to 10 to 30 kilograms per person per year.

Stage IV - Consumer Goods

• Increased consumption of durable goods such as automobiles.
• Increases in the consumption of metals with specialty applications such as nickel and fuels

Stage V - Service Economy

• High but static rates of per capita consumption of minerals in finished goods

Now, lets get to the crux of the issue - What is the true gap between India & China ?

Stage I - Infrastructure
India's per capita cement consumption = 99kg - About 15% of this stage completed
China's per capita cement consumption = 450kg - About 60% of this stage completed

Stage II - Light Manufacturing
India's per capita copper consumption = 0.8 kg - About 8% of this stage completed
China's per capita copper consumption = 2.5 kg - About 25% of this stage completed

Stage III - Heavy Manufacturing
India's per capita Aluminium consumption = 1 kg - About 5% of this stage completed
China's per capita Aluminium consumption = 4 kg - About 20% of this stage completed

India is lagging behind China - However, we do have to remember that the Chinese started their reforms in 1979 (11 years before we did)

This has gotten me excited about cement stocks in India !