Mumbai: It’s been 10 years since Jim O’Neill coined the term BRIC to describe the world’s four fastest growing economies—Brazil, Russia, India and China; South Africa was added to this list subsequently. The BRIC usage gained wider currency in 2003 following the publication of a Goldman Sachs paper by Dominic Wilson and Roopa Purushothaman.
While world growth shutters with countries such as India and China seeing a possible hard landing, O’Neill, chairman of Goldman Sachs Asset Management, continues to bank on the group’s economies.
“In the decade ahead, the BRIC countries will probably create at least another one of their current self, i.e., grow by around $12-13 trillion in nominal dollar terms, assuming that they grow at somewhat softer rates,” O’Neill said in a note marking the 10th anniversary of the acronym’s coinage.
The Indian economy grew 6.9% in the second quarter, slipping below 7% for the first time since 2009. Several economists estimate growth for the fiscal year will drop below 7% in fiscal 2013 due to high inflation, monetary tightening, retreating foreign capital and slowing investment.
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China’s gross domestic product (GDP) growth slowed to 9.1% in the second quarter compared with close to double-digit growth in 2010. Brazil grew 3.1% year-on-year as of June, while Russia expanded 4.1% as of December 2010 after showing negative growth in the previous year.
While the world’s two fastest growing major economies are slowing, O’Neill is more optimistic about India.
“China seems likely to grow by modest rates, perhaps in the 7-8% range, but India could accelerate,”he said. “This could be especially true if India persists with what looks like some sudden passion for policy reform.”
Some of those reform measures, particularly those related to retail, have, however, run into stiff political opposition. That may make it difficult for India to succeed in, as O’Neill puts it, “achieving China-style GDP growth rates”.
He expects the BRIC economies, which have grown around $13 trillion over the last decade, to overtake the US and the European Union (EU) in the coming years. The BRIC economies are still growing fast enough to pull ahead with weak recovery in the US, which has grown 1.5% year-on-year, and the EU, which grew 1.4% year-on-year in the September quarter.
Along with the BRIC countries, O’Neill is also counting on growth to come from Indonesia, South Korea, Mexico and Turkey, which, he says, are the new powerhouses. These are sufficiently large and important enough to be considered “growth markets”, along with the BRIC countries.
He also called for the members of the European Monetary Union (EMU) such as France, Germany and Italy to act in unison as the debt crisis on the continent is escalating and core countries are carrying risk.
“If EMU is to survive in the future, then the euro zone must start to act collectively as one and that is where they are headed,” O’Neill said.