Millennium Post

What is the ‘I’ in BRICS?

What is the ‘I’ in BRICS?
By Sumati Rajput

Brazil, Russia, India, and China, most popularly known as the BRIC nations, have received a lot of global attention ever since the establishment of this block of emerging economies in 2006. As the wave of economic and social growth sweeps across the developing world, 2010 brought in South Africa into this group, changing its identity to BRICS’ As of 2011, BRICS contain 43 per cent of the world’s population, are responsible for 18 per cent of the global trade, and account for about 25 per cent of 2011’s Gross Domestic Product (bases on PPP). These statistics highlight the extent of the economic power that is held by these nations and the significant impact their progress will have on the entire world. Therefore, these nations are constantly under scrutiny in terms of their policies, their political climates, and their economic growth rates.

In the recent past, another Asian nation that has come under the developing world spotlight is Indonesia. A simple analysis of the Indonesian economy reveals that, in addition to growing at par with most of the BRICS nations, Indonesia actually outperforms them on numerous growth indicators. This is evident in the Indonesia competitiveness report for 2011, which ranks Indonesia fourth in global competitiveness, lying, above all BRICS nations, except China. In order to understand the relationship between India and Indonesia in the ‘emerging economy rat race’, it is interesting to analyse and compare some of their socio-economic indicators.

The economic growth-rate measures an annual or quarterly rate of change in the Gross Domestic Product of a nation. Ideally, every nation aspires to have a positive growth rate as that attracts investment within the domestic economy from locals as well as foreign internationals. Additionally, a positive growth rate is indicative of an increasingly healthy, educated, and skilled population with a rising standard of living. Indonesia’s economic growth rate over the past decade has been steadily mounting. In 2001, Indonesia’s growth rate stood at 3.64 per cent, and it has ever since, grown every year this decade except in 2009. In 2011, it stood strong at 6.46 per cent, with a positive growth outlook for the upcoming financial year. India’s economic growth rate, on the other hand, has experienced drastic fluctuations over the past 10 years. Touching a high of 9.8 per cent in 2007, and a low of 3.89 per cent in 2008, India’s economic growth rate projected a growth of 6.86 per cent in 2011. The recent quarter has indicated an even lower figure for the current financial year.

Investor sentiment in India has also been adversely affected because of the recent S&P downgrade of India’s sovereign debt; Indonesia, on the other hand, received its first Investment grade in 2011. Such instability in India’s economic and financial growth has caused the RBI to make numerous consecutive policy changes which include deregulating the financial system by lowering the cash reserve ratio, increasing liquidity and stimulating borrowing by lowering interest rates. Such instability has caused a lot of uncertainty within the domestic and international arena regarding India’s true economic climate.

Unemployment and inflation are useful determinants in predicting the health of a national economy. Despite India’s phenomenal growth pattern, India’s unemployment rate seems to be steadily increasing over the past decade. In 2004, India’s unemployment rate, as per official World Bank statistics, stood at 4.4 per cent, while in 2011, it reached as high as 9.8 per cent. Contrary to this trend, Indonesia’s unemployment rate has been consistently declining, supporting its robust economic growth pattern.

A phenomenal accomplishment of the Indonesian policymakers is the reduction of Indonesia’s poverty afflicted population. In 2000, about 50 per cent of Indonesia’s population lived below the poverty line on less than $1.25 (PPP). However, with consistent human development efforts, only 19 of the population subsist at that level today. Furthermore, Indonesia has also been seeing a rise in its higher income group. In 2011, Indonesia recorded about 112,000 billionaires, and expects an increase in that number by 100% over the next five years. From this trend, it appears that the Indonesian population is becoming wealthier at all income levels, while in India, that is only true for the higher income group, which is widening the inequality gap in India.

In light of the above discussion, there is apparent ambiguity in the requisite qualification for belonging to the emerging economies block ‘BRICS’. In measuring significant economic indicators such as economic growth, unemployment, and inflation as well as key social indicators such as poverty rate, literacy rate and life expectancy, Indonesia seems to be achieving consistent growth in its overall economic development. If Indian policy makers do not act with agility to advance Indian economic amelioration efforts, it is worth wondering if the ‘I’ in BRICS will continue to remain India in the foreseeable future.
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