October 21, 2020

Asian Lube Map 2020 | Leaderboard | 600×75
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By Jonathan Yates

Due to the size of their populace and Gross National Product (GNP), both China and India leave a huge footprint in the world’s wholesale commodities market.

But the Chinese policy of one child per family that was implemented in 1979 has resulted in its population being about 400 million less than it could have been. This has produced the worst combination for economic growth: a decline in the working-age group, along with a rise in the elderly. Overall, senior citizens will increase by 60% in China by 2025, while those working will drop by 35%. This will result in a decline of 1% in China’s gross domestic product. It will also hinder China’s transformation to a consumer economy for two major reasons: There will be 400 million fewer consumers; and more will be in the oldest demographic, who are not buying new cars and new houses, rather than in the group with the most spending power.

Meanwhile, India’s economic growth is being hindered by government policy, but in a different arena. India’s population is anticipated to reach 1.7 billion by 2050, with China’s remaining at 1.3 billion. The population of India will also be younger. In 2040, it is estimated that China’s mean age will be 46, compared to 34 in India, meaning there will be more consumers in India who are younger. That should translate to more homes being built and personal vehicles being bought.

But political considerations, along with the investment in infrastructure and manufacturing in India from both foreign and domestic sources, have not been nearly robust enough to have as much of an impact on Indian demand. The period of massive, sustained, double-digit investment in the Chinese oil sector soared for more than a decade. For India, it was less than half that long and ended in 2008.

GDP growth in India fell from nearly 10% in 2008 to under 4% in 2009. That would be the time for massive investment from the government, the private sector and foreign entities. But India has 28 states, seven union territories, 22 official languages, six major religions, 645 “scheduled” tribes and the caste system, which makes it difficult to pass stimulus packages like the United States and China did to boost consumer spending. Thus, the private sector in India was crippled by The Great Recession. From the low base in The Great Recession, GDP growth in India rose by 10.3% in 2010, but fell to just above 5% in 2013.

For the next five years, India’s GDP growth is expected to be around 6.35%. By 2030, India will be the third-largest economy in the world, according to the United States Department of Agriculture, trailing only the United States and China. In terms of lubricants consumption, it is the third largest after China and the United States. However, it trails significantly from the market leader China at just above 1.5 million tonnes per year compared to China at just below 7 million tonnes.

The Indian economy is projected to more than triple from its present size, reaching USD 6.6 trillion. Even with the most people, that will be far behind the estimated USD 22 trillion for China, due to the lack of investment in the Indian economy.

Thus, while India is projected to exceed China in overall population by 2024, the growth in the number of its citizens should not be expected to result in a proportionate increase in fuels and lubricants demand. Just as China’s policies have kept down population growth with the “One Child” policy, India’s suppression of foreign investment has stultified the growth of its infrastructure. As a result, the shortfall in the number of Chinese and the truncated economic growth in India will leave demand for fuels and lubricants far below potential levels.

 

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