BRIC: economic power house in the making
Brazil, Russia, India and China are the cynosure of the world - as a
group they are called BRIC. The four countries are beginning to be
dominant economies. They would equal or surpass USA, Germany, Japan and
France as a bloc within the next two decades.
The economist who predicted that in 2001 was Jim O’Neill, chief
economist for Goldman Sachs, who publicly, and in Goldman’s name got it
right. BRIC’s amazing growth as an economic powerhouse by 2025 seemed
smack on target.
BRIC has come into everyday parlance describing the manner
investments take hold as financiers and policymakers combine their
strengths. It was reported that many financial institutions now run BRIC
funds; business schools have launched BRIC courses. In Brazil, Rio de
Janeiro organized the first BRIC think-tank this year. The concept is
catching on like lightening.
Economic boundaries
It was standard practice to always look up to USA-Europe axis and its
appendages when talking of economic norms. O’Neil has virtually re-drawn
a new focal point of reference. The shift is quite discernible.
Fundamental forays into thinking in terms of economic strength in areas
like planning, investment outlook and assembly of resources impressed
O’Neill as he made his forecast.
Dominant economies
* BRIC comprises Brazil,
Russia, India, China
* China world’s second
largest economy
* India’s economy tenth
largest in world
* Brazil’s economy seventh
largest in world
* Russia’s economy eleventh
largest in world |
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An investor
at the Shanghai stock exchange. Picture courtesy: Google |
The dominant globalization force prevalent for decades with USA
setting the pace had taken a tumble. Market forces are not the only
sacrosanct principles now. There is a greater depth of understanding
among nations and key players like China and India with Brazil and
Russia in their wake able to set the tone.
Non-Western economic thought
O’Neill was quite certain that the time for making the paradigm
change would come.
A closer examination of the non-Western way of economic policy
perspective started to trickle down and soon it was a stream in spate.
BRIC countries are poles apart geographically and culturally. Their
impact seemed as if they are a bloc.
They had the largest populations of the world amongst them as they
plunged into global markets with great dynamism. They were acting as if
they were in unison being governed by one body. Their economic focus
jived.
The achievement of BRIC seemed staggering. China is the world’s
second largest and fastest-growing major economy, with average growth
rates of 10 percent for the past 30 years. She is also the largest
exporter, second largest importer of goods in the world and world’s top
manufacturer in 2011, surpassing the United States.
Huge capital inflow to China
The inflow of capital into China is strikingly huge. In 2010, inbound
foreign direct investment into China surpassed $100 bn for the first
time, and investment overseas by Chinese companies in non-financial
sectors totaled $59 billion. The country’s per capita GDP is $7,518
(IMF, 93rd in the world) in 2010.
The economy of India is the tenth largest in the world by nominal GDP
and the fourth largest by purchasing power parity (PPP). The country’s
per capita GDP (PPP) is $3,339 (IMF, 129th) in 2010. India has shown
amazing agility in pursuing multiple goals of growth and income
re-distribution within a democratic setup.
The economy of Brazil is the world’s seventh largest by nominal GDP
and eighth largest by purchasing power parity. Brazil has moderately
free markets and an inward-oriented economy. Its economy is the largest
in Latin American nations and the second largest in the western
hemisphere. Brazil is one of the fastest-growing major economies in the
world with an average annual GDP growth rate of over 5 percent.
The economy of Russia is the eleventh largest economy in the world by
nominal value and the sixth largest by purchasing power parity (PPP).
Russia is endowed with an abundance of natural gas, oil, coal and
precious metals. Russia has undergone significant changes since the
collapse of the Soviet Union, moving from a centrally planned economy to
a more market-based and globally integrated economy.
Billionaires galore in Moscow
Russia for the first time showed steady economy gains, and partially
closed the competitiveness gap with India and China among the BRIC
economies. Important steps taken since the 1990s toward fiscal
sustainability, as well as measures taken to liberalize and open the
economy, have significantly boosted the country’s competitiveness.
As of 2011, Russia’s capital, Moscow, now has the highest billionaire
population of any city in the world. Economic reforms in the 1990s
privatized most industry, with notable exceptions in the energy and
defence-related sectors. That privatization process, including a much
criticized ‘loans-for-shares’ scheme that turned over major state-owned
firms to politically connected ‘oligarchs’, has left equity ownership
highly concentrated.
Four diverse economic entities are showcasing their strengths in an
extraordinary manner. The paradigm shift has arrived.
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