The main constraint on urban expansion in India is that land prices are now very high around the main cities and land acquisition through eminent domain is facing ever-growing opposition from farming communities. This is causing new developments to increasingly go vertical. Land prices are also forcing urban growth to cascade down to smaller centers. Large cities like Delhi and Bangalore have seen explosive growth since the mid-nineties. By around 2000, we saw strong growth in the next tier of cities such as Pune, Ahmedabad and Jaipur. In the last few years, towns like Coimbatore and Mysore have seen rapid expansion. The phenomenon is now trickling down to ever smaller "moufassil" towns. Transport linkages are a good predictor of future growth. This not only benefits the terminal hubs but also leads to a ribbon of developments along the way. Thus, urban India is beginning to look more like a spider-web of urban and semi-urban settlements along these transport corridors. Note that this is a major municipal management problem since most of the ribbon development is laissez-faire construction and its dispersed nature makes it difficult to supply urban services such as waste disposal and water supply. Still, this pattern has a degree of official sanction since the government is promoting projects such as the Delhi-Mumbai Industrial Corridor.

Overall, we feel that cities will continue to dominate the world economy for the foreseeable future. The urbanization of large emerging economies, if anything, will make them even more important in coming decades. Nevertheless, it is likely that net migration to Chinese cities will ease by the end of this decade while the villages will become semi-urban. In contrast, India's urbanization is set to accelerate although spiraling land prices will push the process to smaller towns and ribbons along major highways. There are even signs that Africa may be the next frontier in the story of urbanization. Meanwhile, Americans will have to learn to deal with denser cities.

Eoin Treacy's view Urbanisation has helped to drive commodity demand over the last decade. The migration of hundreds of millions of people from the countryside to an urban environment has resulted in demand growth for just about all industrial resources well in excess of what might once have been imagined. Rio Tinto was reported today as expecting iron-ore demand to double in the next decade, fuelled by infrastructure development. Here is a section from a Reuters story:

At that rate, global iron ore production would almost double over the period, based on industry trade data -- largely covered in the early years at least by expansions underway among the major miners, including Rio Tinto.

China has already built the cities it requires and its infrastructure is on a par with that of many more "developed" countries. This does not mean that infrastructure development is about to cease in China, quite the opposite, but other countries are likely to see considerably more impressive demand growth over the next decades. India is a glaring example of where infrastructure development is taking off, albeit not in the centrally planned manner evident in China. A number of South East Asian countries should help to fuel demand growth.

The RBI's tough stance on inflation has acted as a headwind for the local stock market. However the Indian listings of major foreign companies have held up considerably better than their parent companies at home. Nestle India, Hindustan Lever and Siemens India all remain in relatively consistent medium-term uptrends reiterating the point that shares leveraged to the growth of the global middle class continue to outperform