Mumbai: The boom in global commodity prices will strengthen the growing relationship between the Bric (Brazil, Russia, India and China) economies as it matches the world’s two dominant suppliers of raw materials—Brazil and Russia—with two Asian giants, India and China (which are rapidly emerging as big consumers of these commodities), said Jim O’Neill, head of Goldman Sachs Group Inc.’s global economic research, and creator of the acronym Brics to refer to these four countries.
The commodity price boom, which began in 2005, could continue through to 2015, O’Neill said. “We are only about halfway through a 10-year cycle,” he said.
The famous Bric report (it was co-authored by Roopa Purushothaman, now with the Future Group) did not take into account the commodity price boom. Because of soaring commodity prices, O’Neill wo-uld not say whether there cou-ld be realignment in the world economic order in 2050 as predicted by Goldman Sachs.
O’Neill was in Mumbai on Wednesday to attend the UK-India Round Table, a forum that works for strengthening bilateral relations.
US-based Goldman Sachs, the world’s largest investment bank, published a study in 2003, titled Dreaming with Brics: The Path to 2050. The thesis predicted a dominant role of Bric economies by 2050.
A follow-up report in 2004 by the investment bank noted India’s great inefficiency in energy use and the dramatic under-representation of Bric economies in global capital markets.
In 2007, Goldman Sachs published a second follow-up report, co-authored by Tushar Poddar, vice-president of Asia economic research, asserting that India’s influence on the world economy would be bigger and quicker than implied in previous reports on Brics.
However, “the 2050 dream will not happen if the Bric eco-nomies do not bring in greater energy efficiency,” O’Neill sa-id, but he was reluctant to predict a definite trend for oil prices.
In its latest estimate, Goldman predicts India’s gross domestic product (GDP) to grow 7.8% in 2008, and 8.2% in 2009, and expects the Chinese GDP to expand 10.5% in 2008, and 10% in 2009.
Poddar said unlike the boom in commodity prices, the sharp rise in the price of basic food materials, which has caused a global crisis, is a temporary phenomenon. It (the rise in food price) is unlikely to last beyond a year’s time, he said.
A late-March study by the International Monetary Fund had said “the resilience ofhigh commodity prices will depend on the extent of spillovers of slowing growth in advanced economies to the rest of the world.”