Falling Bric

India's macro numbers are harming its global image

It has been more than ten years since the term “Bric” was coined. The Bric nations – Brazil, Russia, India and China – were supposed to be the engines of global growth, the new poles of the world economy as Europe and North America slipped slowly into twilight. Yet Jim O’Neill of Goldman Sachs, the man leading the team that coined the phrase in 2001, has been quoted as saying that “there are important structural issues about all four, and as we go into the 10-year anniversary, in some ways India is the most disappointing”.

Indeed, the numbers seem to bear him out, and are very stark. Inflation, at a two-year low in December-January, is nonetheless a few percentage points above the other countries’ rates. India’s public debt-to-GDP ratio was always high as compared to the others; but that number is particularly noticeable now. At around 66 per cent, it is generally cited as being the second-highest among emerging markets. For comparison, China’s is at 16 per cent, and Russia’s even lower. This is not purely an artefact of India’s turn to welfarism, or its lack of natural resources. Other resource-poor – and democratic welfarist – countries are doing much better: the corresponding ratio for Thailand is 44 per cent; Indonesia’s is 25 per cent. The Economist recently ranked countries on their “fiscal space”, using an index that aggregates inflation, credit growth, the real interest rate, exchange rate movements, and the current account balance on the monetary side, and public debt and the budget deficit on the fiscal side. India came in as the second-most constrained country in the world, after only crisis-hit Egypt.

Clearly, India needs to stop thinking of the three other Bric countries as its peers. It has also lost its claim to being the second-fastest growing country among the significant economies of the world. They have pulled away on the strengths of sustained growth (China), resource management (Russia) and fiscal innovation (Brazil). Yet, even more intriguingly, the whole idea that the Bric countries were the emerging markets to watch is being undermined. India’s poor performance has a lot to do with that, but so does the comparative strength shown by some smaller economies. One group, being called the “Civets” – a cat-like creature found in tropical jungles, not generally counted as a member of the cat family, but fast and predatory nonetheless – is being increasingly watched by investors now. The group consists of Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Many of these countries – and others, including Malaysia and Thailand – are performing better on most indicators than India, and have governance mechanisms in place more reassuring to investors, too. Consider Turkey: under Prime Minister Recep Erdogan’s lengthy tenure, it has stabilised political risk. Its exports have ballooned, and the economy has grown at seven per cent plus for several years. After a tough financial crisis in the early 2000s, its economy has tripled, and public debt and spending have been controlled. Perhaps there’s a lesson there. Russia, Brazil, Thailand, Indonesia and Turkey all learned from their crises that macroeconomic prudence pays dividends to citizens. India, apparently, did not learn that in 1991.