Amit Sinha(www.indicus.net)The central idea is that when an economy’s GDP per capita passes $1,000, increased income begins to change patterns of demand and push economic activity into a new, high-growth phase.
I first saw the S-curve in detail about 10 years ago. I was thenworking in the cement industry. The per capita GNP and the per capita cement consumption of about 60-70 countries weremapped. The horizontal scale was per capita GNP and thevertical scale was the per capita cement consumption. Thecountries were marked on this grid.It was fascinating to see that most countries were placed along atrajectory that was in the shape of an S. There was considerablescatter, but the basic S-shape was discernable. The implicationwas that as long as the economy was at low income levels,growth in consumption was low. When it reached a certaincritical mass (Typically about per capita $2,500 ppp), it movedinto a significantly higher growth trajectory (the middle portionof the S). Mature economies had low growth and even a declinein consumption, the upper end of S. The higher growthtrajectory had at that time already been witnessed in SE Asia andChina.This excited us a lot and we set about projecting the GDP andestimating the take off point for the Indian economy and cement,steel and other basic goods in particular. We came to theconclusion that if all our assumptions were correct, 2003-2005