Editorial: New Bric winners

Five years ago, Goldman Sachs came out with its Bric report. This underscored something that most felt was intuitively correct, but had never articulated succinctly, that the economic stars of the future were going to be Brazil, Russia, India and China. This group, which accounted for barely a seventh of the GDP of the G6 countries in 2000 would, Goldman Sachs forecast, surpass the G6 by 2040 in straight dollars (not with currency corrections for purchasing power parity). Within this, the forecasts for India were even rosier "" its GDP would exceed that of Japan by 2035 and that of the US shortly after 2050. Indeed, of all the countries, India's projected path to glory was the longest, on account of its younger and, eventually, better educated and more dynamic population. A couple of years later, with the Bric economies doing even better than had been predicted, Goldman Sachs advanced its forecasts, and India was set to become bigger than the US even before 2050. How seriously this was taken can be seen from the fact that the country's largest retailer, the Future Group, hired the Goldman Sachs author, Roopa Purushothaman, as its lead economist "" if India was going to be a big part of the future, then the woman who predicted this was going to be part of it.

How things have changed! The very rise of the Bric economies has meant a surge in demand for all manner of commodities, whose prices have gone through the roof. With the resulting commodity boom still on, and oil prices continuing to burn up the charts, the two fastest-growing Bric economies (India and China) have been exposed for their import dependency when it comes to commodity needs, while the other two have profited from the boom. Russia accounts for over 12 per cent of global oil production, and Brazil is a strong exporter of things like iron ore and ethanol, the oil substitute. It's not surprising, then, that while India's stock market has fallen more than 35 per cent in the last six months, and China's by even more, Russia's has risen marginally and Brazil's by around 15 per cent. For the first time in six years, Brazil's stock market capitalisation is greater than that of India. Indeed, with Brazil's GDP growing 5.8 per cent in the latest quarter, its economy is picking up speed.

The change within the Bric quartet is already visible, even as all four countries continue to do better than expected. By 2015, for instance, the original Bric report's forecast was that the Bric GDP would be 56 per cent of the US; the latest forecasts by the IMF suggest this could rise to over 80 per cent by 2013. Within this, while Brazil's 2015 GDP relative to the US was forecast to be around 6.5 per cent in the original Goldman Sachs report, the IMF thinks this will be double that number by 2013; Russia's GDP was forecast to be 8.3 per cent of the US by 2015 in the Goldman Sachs report while the IMF thinks this will more than double, to 19 per cent. The IMF forecast is that, by 2013, both India's and China's GDP too will be bigger than forecast by Goldman Sachs, but the overshooting is more modest. This could be a case of short-termism, but if nothing else India and China are now more conscious of the commodity-dependence of their ambitions.