By Shreyasi Ghosh:
Earlier when we used to hear the words ‘economic development’, ‘financial giant’ etc, immediately the names of the United States of America and the European Union used to come to our minds. India, China, Brazil, South Africa etc were put in the same bracket as the ‘Third World’ countries while the disintegration and overall economic and social instability of the Soviet Union in the post Cold War period had deemed it not worthy of being taken into serious consideration when global economic growth was being discussed. To most middle class Indians, America continued to remain a manifestation of our strongest personal aspirations and a means to make impossible dreams come true, the growing exchange rate of US dollar making it the most powerful currency in the whole world granting them a life of wealth and financial security with the luxury of apparently doing nothing.
Colonization and imperialism had virtually crippled the economies of these so-called Third World countries and left them with the humongous task of building their economy from scratch and make their presence felt in the global economic platform. This had granted them the status of developing countries – countries whose fledgling economies were not expected to be a threat to the economic aspirations of some of the richest countries in the world.
But no one foresaw that the world was in for a major surprise which came in a package called BRICS. An acronym for Brazil, Russia, India, China and South Africa, it is the name given to represent the status of these countries as the leading global ‘emerging markets’ with tremendous potentials for economic growth. Their rapid pace of development had taken the world by storm, forcing eminent economists around the world to predict that by 2050, the combined economic developments of the BRICS countries can take on those of the richest nations in the world. The G7 nations are no longer the nucleus of global economic progress; there is a shift of power from the developed to the developing countries and the BRICS nations are making the most of these opportunities.
The BRICS countries have undergone massive changes in their social and political systems to realize their economic potentials. They introduced liberal economy, opened their markets to foreign investments and encouraged entrepreneurship. And the efforts are now paying off. India and China are predicted to emerge as the leading suppliers of services and manufactured products while Russia and Brazil will be the world leaders in supply of industrial raw materials. Their energy resources, raw materials, manual labor and technology are the reasons behind them flourishing in the global industrial sector.
The inclusion of South Africa into this bracket means a gateway into the vast African continent with its huge mineral resources, manual labor and investment opportunities. A formal cooperation between these countries will result in them emerging the combined next global superpower calling the shots in the international economic front; Brazil and Russia can be the foremost raw materials and commodities suppliers to China and India making their tie-up a formidable one.
A lot of researches have been going on to fully understand the impact of the economic progress of the BRICS nations and a formal BRICS coalition. The International Monetary Fund has estimated that by 2011, the BRICS market will expand by 6.5% whereas the market for the developed countries will expand only by a meager 2.5%. According to a study conducted by Goldman Sachs, the number of people with yearly income exceeding $3000 will go above 800 million in ten years in the BRICS countries and by 2025, there will be an upsurge in number of people earning above $15000 to about 200-300 million.
China is predicted to enjoy a steady GDP growth and by 2030 the global market capitalization might be seeing the BRICS nations dominating over about 41% of itself. If the BRICS population increases to about 44% of the world population by 2015, it will mean more labor force though less per capita income. But then if it falls to 37.1% by 2030 as predicted, this phenomenon along with the steadily growing GDP figures will mean greater per capita income thereby ensuring better living standards for the population. The BRICS group is now in a position to demand a revamped monetary system with lesser reliance on the dollar as they feel that US’s trade and budget deficits will bring the value of a dollar down resulting in the global economy collapsing.
These are mere facts and figures which might elude a layman. But no one can deny that the middle class in the BRICS nation, especially India is experiencing an unprecedented economic growth and has become more diverse. The expansion of the middle class is a clear indication of the dominance of the BRICS countries in the global economy. Multinational companies are there in different sectors of the economy and every day we get to hear about new tie-ups with new companies. There are more foreign investments, more imports and exports, more industrialization, lower interest rates, less red tape and more economic reforms making the market investor-friendly.
Economists have studied the rise of India and China in the economic forefront with great interest. The projection figures representing the economic growth in India predict that India is set to emerge as a frontrunner in the race to a global economic supremacy in a big way than anyone can imagine. Foreign investors are already vying for the attention of the Indian market; the middle class will expand even more and new jobs will be spawned by the significant amount of research and economic development going on here. India’s success story even brought the US President on our soil to discuss the four point agenda, two of them being foreign investments in India and seeking India’s help, in the form of jobs to give a boost to the flagging US economy.
China is another big name to reckon with. China’s meteoric rise has alarmed the US so much so that it is seeking India’s help to take on the Chinese. And it has reasons to feel so. China is all set to emerge as the largest equity (stock) market by 2030. By 2050, it will have a GDP surpassing even the remaining members of the BRICS. China is set to control about 70% of the combined GDP registered by the BRICS countries. Thus, influencing the world economy in a big way China can strike a blow to the US economy thereby destroying it for good.
However, among the BRICS nation themselves, the economic growth is not uniformly distributed. While only Brazil has the capacity to supply resources, provide manufacturing and other services all at the same time, the same cannot be said about the other countries.
India battles problems such as massive corruption, poverty, illiteracy, lack of infrastructure, misuse of funds, internal problems, political tensions and security issues, both internal and external which keep it from realizing its true potential. The country is also noted for its inefficient use of available energy sources. Also the burgeoning population brings down the per capita income levels from the accepted values, though the figures of the aggregate wealth are pretty impressive. Same goes for South Africa which is plagued by the problems of civil unrests, diseases, absence of modern infrastructure etc.
China suffers from human rights issues, like Russia and their authoritarian regimes might result in widespread political unrest as well as conflicts with the labor forces thereby landing a major blow to the Chinese manufacturing industries. Russia has an unstable political situation along with lack to near absence of modern infrastructures which often overshadow its economic progresses.
Brazil has an entirely different story to tell; it has more or less stabilized inflation and well-thought macroeconomic ventures have strengthened its economy. It has a more developed and diverse economy and is even richer than India or China when measured on a per capita, but it has a low growth rate which often stymies any concrete progress.
Some economists argue that the countries have not been able to live up to the expectations of the investors; some blame it on security threats, internal problems like unrests, riots or poverty or on tensional relations with neighbors, or corruption and bureaucracy. Some even feel that greater industrialization will mean the slow but steady depletion of energy resources and in absence of renewable sources, our factories will soon run out of fuel. Whatever be the problem, according to this group of economists, the BRICS will not make much contribution towards the world economy despite immense potential.
The BRICS have to undertake greater responsibilities to achieve greater and a more permanent success. Problems such as disparity of wealth, low rate of industrialization and industrialization at the cost of human resources, corruption, security threats etc have to be dealt with immediately. Or else, so much effort and hard work to achieve economic progress will amount to nothing. The BRICS nations have to tread the fine line between economic progress and sustainable development so that the present speaks of voluminous financial success but the future doesn’t look bleak either.