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India And Other BRIC Economies Now Facing Headwinds
Originally published on Wed August 21, 2013 5:21 pm
High food prices, a currency in free fall, battered investors and slowing growth: India is facing a host of problems that have taken away the sheen from an economy that's had a decade of mostly strong growth.
Some of those problems are also hitting other key emerging markets, including Brazil, China and Russia. These so-called BRIC countries have been critical to driving the global economy in recent years, and they generally fared better than most other nations during the global economic downturn that hit in 2008.
They are all still growing, but not at rates they have been accustomed to.
Meanwhile, some of the world's developed countries, which were hard hit in recent years, are showing signs of life. The U.S. is growing, and the European Union and Japan are doing a bit better as well.
Here's a look at the shifting economic fortunes:
India, Bloomberg noted in an opinion piece, faces "a crisis of credibility." The process of economic reform that began in the 1990s, it said, "has ground to a halt." Corruption, red tape and subsidies are only one part of the problem.
India faces serious structural problems: As Mark Mobius of the investment firm Franklin Templeton told GlobalPost: "The surprising thing is the government doesn't seem to be acting with any degree of urgency."
Recent protests reflected the frustrations many felt at rising prices and a slowing economy. The Wall Street Journal reported that Brazil would "remain a drag on the rest of the world for the next few years."
"The economy remains reliant on consumption, mainly fueled by credit, both of which are showing signs of exhaustion. Industry remains stagnant, and, for the last four months, unemployment has crept up from historical lows. Most worryingly, the hefty investments needed to overhaul Brazil's ramshackle infrastructure aren't coming through," the Journal said.
China's double-digit economic growth over the past 15 years lifted millions out of poverty and vaulted the country to the world's second-largest economy. Chinese products fill shelves in the U.S. and elsewhere, and Chinese companies have invested billions of dollars across the world.
But, as NPR's Jim Zarroli reported recently, the Asian nation also faces a slowdown, partly caused by the global economic crisis but also because it's trying to move from an economy built on government spending to one based on consumer consumption.
Growth in Russia has fallen for six consecutive quarters. It was growing at an annual rate of just 1.2 percent between April and June. Those numbers come after a decade of mostly strong growth, which was credited to tight monetary policy and fiscal discipline.
But now that its economy is sputtering, those same policies are being criticized. Russia analyst Mark Adomanis noted in Quartz that "though Russia has some significant domestic problems ... towards the end of 2012 and the beginning of 2013, a broad swathe of countries in eastern Europe, including Russia and Ukraine, all started to weaken economically."
In other words, Russia may be feeling the effects of a regionwide slowdown.
The U.S. and EU meanwhile are still recovering from the fallout of the 2008 economic crisis, but are showing early signs of recovery. As The New York Times noted:
"Even the most optimistic forecasts do not see the United States or Europe reaching the double-digit levels of growth that China and India have enjoyed over the last decade. Analysts are expecting that growth in the United States will rise from less than 2 percent this year to nearly 3 percent next year. Because the developed economies still account for nearly 60 percent of the global economy, even a slower pace of growth can provide more economic activity than faster growth in the developing world."
But, the newspaper said, even that modest growth could be imperiled if China's economic problems become worse.