BRICS– consists of 5 nations Brazil, Russia, China, South Africa and Ind—————— err…what is I, India or Indonesia? A food for thought and also a puzzle that needs to be fitted and sorted out. I have some pieces with me here to solve this jigsaw…so help me unfold this mystery of the hidden ‘I’ in the BRICS!
Entry into the BRICS club has always been seen as a sign of success for India as it intends to encompass fast growing emerging-market countries.
Indonesia a small economy (and often unnoticed) does it actually have the potential to overpower India and substitute it in the BRICS club? Confused; why a sudden urge to deal with this question now…; maybe because of the recent slowdown in India (agreed to the fact that all emerging economies of the grouping are seeing some trouble ahead; but India is the worst hit)
An investigation into long term prospects and current economic scenario of both claimants of I in BRICS league can give a clearer picture of which country deserves to be the ‘I’ in BRICS.
Political and growth paralysis in India
India, which once saw its economy growing at a rate of 9%, is now suffering from “policy paralysis”.
Investments have been stuck due to non availability of raw materials and our lazy committees and ministry that takes years to decide whether a project is a potential damage for the environment and producers or not. Indian government took years to allow multi brand retail in India and kept the conditions firm; it is good and convincing only as long as the economy is in a healthy state but our economy is currently suffering from a major policy paralysis and needs immediate treatment. By the way, a big congratulation is here in order as our government has realised this but surely too late that only one company TESCO has applied for an entry into India’s multi brand retail business. Moreover the newly added uncertainty whether FDI is allowed in Delhi or not after the claim by our “Aam” CM Mr. Arvind Kejriwal and what will be the condition and criteria for multi brand retail after general elections is a new cause of tension for the investors, who are as it is trying to shy away from the Indian markets…Kudos to India ..I just wonder how it manages to obtain such a wonderfully depressing report card every year! (True examples of persistent performers I tell you)
Economic growth has collapsed, industrial output has stagnated for two years, jobs are being shed, consumer inflation is close to 10 per cent, the current account deficit in the balance of payments is nearly five per cent of GDP at last count, investment is fleeing abroad, external debt maturing in the current fiscal year exceeds $170 billion and the rupee is touching new lows (or highs against the dollar!) each week.
Although our Prime Minister, DR. Manmohan Singh is trying to generate hope among all shareholders, investors and consumer that India will cross the benchmark of growth rate of 5%, however all international agencies have led down its claim. For decades there has also been a neglect of manufacturing sector in India. The share of manufacturing in GDP has stagnated at around 15-17 per cent for decades in India.
According to The Economic Times, India achieved its maximum growth rate of 9.5% in 2005-06 followed by 9.6% and 9.3% in subsequent years; however the growth was robust but unsustainable as it slowed to 6.2% in 2011-12.
Indonesia’s Claim to Fame
On the other hand if we look at Indonesia, the Indonesia’s economy has been growing fast for the last twelve years. Economic growth and development are making the Indonesia citizens better off.
Indonesia has benefited from the fact that a huge part of its growth is driven by domestic consumption, which accounts for 60% of Indonesia’s economy, and its growth is not much led by exports which shielded it from the slowdown in euro zone.
Indonesia has also emerged as a more likeable economy for foreign investment. Recently, the global cosmetics giant L’Oreal chose Indonesia when it invested some $130m (£86m) in a state-of-the-art factory just outside Jakarta to produce 700,000 products per day, ranging from whitening creams to shampoos for both the domestic market as well as for exports to neighbouring countries.
However let’s not get too overenthusiastic here! Whilst we are brandishing our swords to lash out against India….we should also do a little sneak peek into the bigger picture! Indonesia’s economic growth is neither sustainable nor inclusive as it is mainly driven by commodity boom, fuelled by China’s appetite for raw materials and global demand for bio fuels. Did you notice China’s obsession to crush us…didn’t even spare our name in BRICS!
Moreover Indonesia’s rich natural resources are finite. Already, the nation’s oil reserves are dwindling faster than in any other Asian country
On the other hand India’s economy is still stable; its medium-term growth drivers are intact. India just needs to address 3 important aspects- its current account deficit, fiscal deficit and gross domestic savings rate. Some policy momentum is even visible these days, as said it’s better to be late than never; Indian government has come up with major steps like setting up of CII , speeding up the process of environment clearances, introducing exit policy etc etc.
Obviously everyone agrees to the fact that there’s dynamism in the Indian economy – in manufacturing, agriculture, services – that just isn’t there in Indonesia. No doubt about the fact that Indonesia has shown better growth rates and future prospects than India (just a short term view) but then we should realize that it’s for the first time in 15 years that this has actually happened. So even if the economists wish to include Indonesia in the grouping of progressive and growing emerging economies then they can simply include it as the sixth nation making it BRISCI instead of replacing Indian from BRICS grouping. Well, that’s a win- win situation for all of us then!
Views presented in the article are those of the author and not of ED.