One is the world’s factory, the other the global back-office. The two neighbours, housing nearly 40% of the world’s people, are also the hottest growth economies. If China sizzled at 10.2% economic growth between 2001 and 2012, India has grown at 7.1% since the new millennium started.
Enviable achievement at a time when the US, EU and Japan were reeling in recession during the latter half of the period.
Together with Brazil and Russia, the two populous Asian neighbours formed the BRIC grouping, made famous by a 2001 paper of investment banking giant Goldman Sachs, with the quartet predicted to be home to the mass of world economic activity.
When former Coca-Cola Company executive Neville Isdell agreed in May 2004 to come out of retirement to become the global beverage giant’s chief executive, little did he realise that many people were keenly watching to see where his first overseas trip would be.
Many believed he would hop across to neighbouring Mexico, the largest market for the soda giant outside of the US. To the surprise of many, however, he chose India, which Isdell felt offered great growth potential for the company troubled by falling sales.
The tour to India and China, shortly after he took charge as CEO, made Isdell realise a different reality: the scorching summers in the two emerging Asian giants will help offset weaker consumer demand in the home markets of North America — a gauge of the BRIC’s long-term potential and importance in the world economy.
Yet, has the piling rubble of the world economic crisis triggered by the stunning collapse of Wall Street icon Lehman Brothers forced a rethink on BRIC’s promise as the engine of global growth?
Some analysts believe so.
Recent evidence suggests that China could be slowing, and India seems nowhere near achieving its potential growth of 9%.
“Many investors and market commentators have been too euphoric about China over the last decade and this euphoria is finally abating. Many just followed the herd into emerging markets and over-allocated to many key countries,” Sharmin Mossavar-Rahmani of Goldman Sachs was reported as saying on Thursday. “It is easier to be part of the herd even if one is wrong, than stay apart from the herd and be right in the long run.”
There is a counter-argument that seems equally strong.
In a paper titled ‘If not BRICs, then what? Comparing BRICs and G6 nations in fossil fuels’, consulting firm Deloitte has argued that BRIC countries are increasingly becoming hubs of hydrocarbon reserves, production and consumption.
“They will further attract large amount of capital for the development and financing of new energy supply infrastructure. Over the next decade, it is likely that Brazil will become a major oil producer and exporter, based on its new-found reserves. Russia, in addition to having the largest gas reserve and producer globally, will continue to be a dominant oil producer as its oil companies locate and exploit new reserves to thwart the decline of currently producing fields."
Three years ago US President Barack Obama arrived in India with the largest US business delegation that included the who’s who of American business to any country — a clear sign that its rising economy has never mattered more than now.
And a 5% growth in 2012-13, lowest in 10 in years, might be considered a crawl in India. Yet it still is among the world’s fastest growing, seen through a medium-term prism.