Economic overview of BRICS †Country Assessment-INDIA Essay Example

Economic overview of BRICS – Country Assessment Economic overview of BRICS – Country Assessment-INDIA Essay Economic overview of BRICS – Country Assessment-INDIA Essay Economic overview of BRICS – Country Assessment-INDIA Name: Course: Date: Economic overview of BRICS – Country Assessment-INDIA In 2003, the American Investment Bank Goldman Sachs introduced the term BRIC to their economic papers in an economic report. This acronym is used by the organization when referring to four nations including Brazil, Russia, India and China. In accordance with the report, BRIC countries have the potential of becoming the leading economic powers along with Japan and the United States come year 2050 (Kumar, 2011). The report forecast maintains that BRIC countries will exhibit increased capital demand, higher returns, and stronger currencies. Furthermore, the research revealed the risk ratings for each country, business environment opportunities, and a thorough examination on exports, imports, GDP, and PDI. India Current Situation Goldman Sachs established that India was the second largest nation in terms of the global economy in 1777 with a twenty percent contribution to the global economic output. However, the late 1970s saw the countries economic contribution plummet to three percent due to two centuries of a stagnated economy. In 1991, India implemented new strategies that were designed to reduce obstacles on economic freedom. Since this strategy was implemented, India has been among the rapid growing economies globally (Kumar, 2011). Goldman Sachs forecasts that India bears the potential of raising its economy by a twenty percent margin come year 2020. The key factor to this prediction lies with the resilience of India’s government to maintain its strategic policies on growth implementation and support. The fundamental point behind the economic growth in India is regarded as the result of manufacturing industry productivity since 2003. This growth has also led to the rise in efficiency of private firms. The speed of transitional growth in India can now be compared to other nations in East Asia. The underlying factors amounting to the increase in efficiency have been attributed to favoring trends within international trade, financial sector growth, adoption and investments in information technology and communication. These positive effects on the Indian economy are also results of the implemented reforms across the decades. In addition, the relocation of labor, land, and capital resources from the dwindling agriculture sector to the high producing, service industry has in particular sustained growth and development of India’s economy. Trade openness, information technology investments, construction of highways, cheaper credit have all boosted the returns of the service industry (Kumar, 2011). These processes form the initial stages of development in India and are the dictating factors on the Goldman Sachs’ economic forecast on the Indian nation. Five Year Economic Forecast to 2016 – India India’s GDP had decline be 2.7 percent as at 2011, and its resurgence has been slow through 2012. The industrial output has been weak but minimum wage has risen by 51.1 percent. Investments from loan savings are expected to grow, and business and household loans have doubled in terms of GDP (Preuss, 2012). However, the manufacturing industry in India continues to slump with the latest output data showing a .05 Percent fall. The fastest growth rate was exhibited in printing, reproduction, and publishing of recording media with a remarkable 54.3 percent rise (Preuss, 2012). From this trend, it has been established that GDP is expected to have a growth of 7 percent in the by the end of next year with an average growth rate of 8 percent every year from 2012 to 2016. This rate of growth will be mainly driven by private investment and consumption. The table below shows India’s GDP forecast from 2012 to 2016 in US billion dollars. 201220132014201520164,824.5515,254.5805,734.5796,276.2426,873.984 Country Risk Rating The Indian economy has exhibited a slow growth rate after a long period of monetary, tightening policy and inflation. Growth has only registered 5 percent between January and March 2012, the lowest growth level in nine years (Preuss, 2012). Throughout 2012, growth rate is expected to remain stagnant and far below its average. The policy on relaxing money implemented earlier in 2012 may not have a significant effect because of inflation and concerns for diminishing value of the rupee. The balanced structure between consumption and investment – which explains the country’s success- is beginning to stall. The manufacturing sector is expected to exhibit declined performance but services industry will maintain its dynamic performance (2012). Regional elections held in the countries five states ultimately slowed structural reforms on the tax system, infrastructures, and education. Moreover, government shortcomings cripple the country’s progress through corruption. Several scandals were made public most notably with the commonwealth games and forwarding licenses for telephone mobiles. Furthermore, India faces internal divisions, external security threats including terrorist threats, state-level disputes, and insurrection movements. Combined with weaknesses in policy implementation, these risks imply that the progress of India in terms of growth will be stifled and may rank lowest among the rest of the BRIC countries. Regarding the other three BRIC countries, Brazil bases its strengths on readily available business information, a successful legal environment, accepted business regulatory quality, and capable workforce. Deficient infrastructure however remains the main weakness for Brazil. In China, access to financial information is often opaque and difficult to obtain and in some cases, the reliability of accounts is poor. The protection offered by the legal environment is only provided to foreign creditors in particular. The workforce is relatively trained and the infrastructure is satisfactory. In Russia, they rest their main strength on general skills with the civil service offering general efficiency. Creditors are offered little security by the legal environment. The business environment is undermined by poor law enforcement. Furthermore, transparency regarding ownership and information remain inadequate. According to Goldman Sachs, the BRIC countries are in engaging in efforts aimed at turning their weaknesses into opportunities and fueling their strengths to boost their economy. India will focus on following up on policy implementation and quelling corruption scandals that plague the country. Brazil plans build on its infrastructure including communication, schools, and roads. These kinds of projects will boost the economy and provide employment for the capable workforce. China mainly plans to make its legal environment favorable foreign creditors to encourage investments within the country. Russia on the other hand aims to harness the skills of its workforce and strive to quell poor law enforcement on policy management. Goldman Sachs establishes that these factors were put into consideration hence giving rise to the forecasted economic status of the BRIC countries. Trillion US $ 2012 GDP 2016 GDP 2012 PDI2016 PDI2012 IMPORTS 2016 IMPORTS 2012 EXPORTS 2016 EXPORTS Brazil718952 8456751346355321Russia9171232 7057858966867618India10111411 18174233321808928868China33164754 12229186001357818975 India Business Environment Rating Progress is expected in efforts aimed at simplifying the country’s burdensome tax policy and this along with the manufacturing industry, will remain the weakest business environment areas in India. A sluggish pace in reforms and shortages, in skilled labor, will continue to weaken the country’s investment environment. Furthermore, the repercussions of the global crisis experienced in 2008 are still visible through slow development of the financial sector and limited resources for improving the nation’s infrastructure, education and healthcare (Preuss, 2012). However, the forecast period maintains that India’s business environment will become favorable. The Indian government will ultimately become more selective when granting access to foreign firms within the country. Highly resourceful countries have greater advantages of acquiring easy access to current technological trends. Considering this premise, it is imperative that developing countries such as India double their efforts towards maximizing their opportunities associated with offers based on E-business. In this current age, nations with low resource levels are capable of accelerating their development. A combination of this development with ICT- based infrastructure will open opportunities in knowledge-based economies. India falls under this category since it is a developing nation with reliable resources. Therefore, should the country work towards quelling factors that hinder its development, it would be ready to engage in E- business. Tradeoff According to Motamen-Samadian (2009), trading the country risk degree versus business environment ratings for India in terms of market size would involve evaluating the limit of potential return from India: country’s current size and state characteristics that may hinder development. This would be followed by assessing the risks hindering the potential returns. This would involve an evaluation of the political, economic and business environment that offer uncertainty regarding the realization of the potential returns. Tradeoff would therefore, be achieved by balancing these two variables. Trading the country risk degree versus business environment ratings for India in terms of market growth would involve concentrating on the role of country risk and institutional indicators in predicting the financial performance of India. Country risk rating has a negative association with its financial performance. Therefore, trading off would be achieved by balancing productivity against profitability of the country. Reference Kumar, N., Asheulova, N. (2011). Comparative analysis of BRIC countries. Annals of Library and Information Studies, 58, (3), 228-236. Motamen-Samadian, S. (2009). Risk management in emerging markets. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan. Preuss, L., Barkemeyer, R. (2012). Emerging country economies: is India a different shape of BRIC?. Corporate Governance, 11, (4), 371-385.