Tuesday, April 22, 2008

Russian millionare count soaring

Kommersant reports that the number of Russian millionaires is now greater than the number of Indian millionaires. I had to do a double take on this: the first thing that comes to my mind when I think of India is economic growth and transformation. Perhaps that is giving India a bit of short change, since it also boasts a rich cultural and religious history that has influenced large swaths of the globe.

To an extent, this reinforces my belief that Russia is the hidden gem in so-called emerging markets at the moment. While this may be a cause for celebration, it is also a cause for concern: take a deeper look and you'll find that the wealth is being generated predominantly in connection with extractive industries. This means the economy is vulnerable to price pullbacks in commodities and not structured to experience the kind of explosive and sustainable growth associated with technology and intellectual industries. Extraction based economies have had a devil of a time diversifying. The Kremlin is looking to address this in fits and starts (see previous posts that look at some of initiatives of the Ministry of Economic Development and Trade), but it is a decisive matter for the future of the Russian economy that will influence the country for generations to come.

In the meantime, I believe India is doing a lot of the right things, especially by building industry (and wealth) organically, based on intellectual capital. They are still leading the way for emerging markets and in some ways for everyone.

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