Logistics and supply chain executives see India as the top emerging market with the most growth potential, according to the latest 2016 Agility Emerging Markets Logistics Index. It is the first time supply chain professionals surveyed by Agility ranked India in this top spot, beating out China.
China’s economic slowdown has taken a hit on this year’s ranking, Agility pointed out. No longer are manufacturers automatically turning to China for low-cost production. China is also competing with nearby markets in Malaysia and Vietnam. Conversely, India’s economy is expected to top China’s through at least 2020.
“Survey respondents revealed that the slowdown seen in China’s economy has undermined its position as the most attractive emerging market, with India replacing it at the top of the rankings,” the report said.
Economic growth was voted the top factor in deciding what country was most likely to become an emerging market, with 31.1% of respondents voting for this. More than 12% of respondents said foreign direct investment was the top factor and 8.4% selected growing trade volumes.
Supply chain professionals in the Agility survey did share some concerns about India. About 42% of respondents said India needs to enact more reforms to continue growth. More than 20% also said India needs more than just economic reform if it is to succeed as an emerging market.
Still, nearly 17% of respondents ranked India as the top emerging market with the most growth potential. China came in second. Brazil came in third, according to the index, with 9.9% of respondents selecting the South American country. Indonesia came in fourth (5.4%) place and Vietnam was fifth (4.8%).
Survey participants are also not optimistic China will retake the top spot among emerging markets in the near future. About 55% of respondents said the Chinese economy has significant structural problems and will face major challenges in the next two to three years. The economic conditions in China have led about 38% of the respondents to reassess their emerging market strategies.
Other Countries That Fell on the 2016 Index
Along with China, Russia, Turkey and Thailand were other countries that slipped on the 2016 index for emerging markets with the most growth potential. Russia, which was ranked seventh on the 2015 index, came in this year at No. 9 — a drop blamed on an “increasingly isolated” economy that began once Russia started backing rebels in eastern Ukraine. Turkey fell three spots from its 2015 ranking, due to slowing growth, fewer imports and continuous instability along its southern border. Thailand experienced slow economic growth rates in 2015 and weaker-than-expected exports among other factors.
Supply chain executives were also asked to identify the countries with that least potential as emerging logistics market. Syria and Iraq topped that list and Ethiopia, Libya and Iran rounded out the top five. War and terrorism and overall instability in the Middle East and North Africa region dragged down optimism in these countries.