Growth indices: practice and reforms
It is estimated that by 2020, the BRIC countries will feature in the top ten largest economies of the world. The assertion that BRIC countries constitute the four fastest-growing economy is based on the structural reorganization of their economic policies, this has seen their trade and industry grow immensely. With the institution of new market structures, the BRIC economies are continuously renewing their vigor in enhancing their investment potent in the global economic arena (Neill 131). They have practically shifted the balance of global economic growth in their favor
Economists admit that it is very rare for emerging nations to maintain a constant progressive growth in their economy at 6% in one decade. However, the consistency of the BRIC economies has shown tremendous resilience within the last few decades despite the general slump in the global economic outlook (Ghosh 97). Are there any fundamental variations between the establishments of these economies in the globe in comparison to other established economic powerhouses? Neill (209) asserts that the elemental differences between the BRIC economies to other established economies, lies not in the management of their fiscal and monetary policies, but the incessant structuring of their internal markets.
The focus of these BRIC economies is the establishment of a stronger internal market devoid of flaws (Lo and Hiscok 12). The enhancement of the investment on the local platform has led to an intense step-up of the production policy within these countries. What the global witnesses with a reformed production platform are an increased capitalization of the industrial set-ups within these nations (Cassiolata 133). Incidentally, the population of the BRIC countries has been phenomenally instrumental in catapulting them to the global economic centre stage (Cassiolato 31).
For instance, it is estimated that cumulatively, their population accounts for almost 45% of the global population. Now, the significance of the large, “empowered” population is quite phenomenal in any economic construct. It is an assured market for large production in front of these countries (Ghosh 17). China, for instance, consumes 54% of its production. Essentially, the inference to this scenario is that the market already has a very strong “backup” within its local locus. This concept applies across all the other three BRIC nations. A study of India reveals that its massive population is a very huge “economic palisade.” With 1.3 billion inhabitants, the marketability of its products in the local fold is immense (Cassiolato 67).
Other than the expansive local markets, huge populations have a “production advantage.” In the global platform, the production capacity of these countries is remarkable (Ghosh 23) In essence; they are assigned a relatively large comparative advantage in the international trade platform. In such a setting, the trade portfolio is enhanced. This factor has brought significant buoyancy in the Indian, Chinese, and Brazilian markets. In reference to “production advantage,” the BRIC countries have a very strong industrial output owing to the efficiency in their labor yield and lower production costs (Cassiolato 301).
This has been very crucial in the attraction of direct foreign investments in these countries. Brazil, for instance, has witnessed a massive inflow of FDIs in the last eight years up to the tune of 12% annually. India and China have been production oases for major foreign entities, and this has been a huge source of their economic strength (Ghosh 226). Conversely, Russia’s consistent growth has defied its reducing population altogether. The population growth of Russia, in comparison to the other three BRIC nations, has been quite “inert.” Despite the stagnant growth, Russia’s institutionalization of its production facets and rampant market rationalization has been the key factors oiling the wheels of growth and development in Russia (Neill 128).
“Extensive” versus “intensive” patterns of growth in the BRIC countries
Are the growth patterns of the economies of the BRIC countries “excessive” or “intensive?” the question of intensive and excessive economic growth defines the foundations and sustainability of growth of any economic structure. Extensive growth focuses on the continuous enhancement of the resource inputs, which are reflected in growing the outputs or rather, the turnouts confederative to demand stimulation and the management of demand. According to Ghosh, the baseline of the extensive growth in BRICs is the fact that resources are plenty and there exists a spare capacity throughout the production system (113). A keen study of Chinese and Indian economic construct reveals that they have intensively adopted the concept of “extensive” pattern of growth. Looking at the factors of growth within the BRIC countries, most of them are attributed to the intelligible management of their resources, this is according to Neill (89)
Russia, incidentally, has been very consistent with “intensive” growth patterns of its macroeconomic and microeconomic structures (Lo and Hiscok 21). The structure of their economic platform is based on the need to increase resource productivity along the tangent of growth in the output and greater consumption rate. Russia’s focus has been on the need for “value creation” and the need to enhance production specialisation across the national boundaries (Marino 44).
A shift in the Brazilian infrastructural policy has been a very effective approach in revamping its economy. The rapid establishment of infrastructural development of Brazil has seen the company tighten its clout in both the manufacturing and service industry in the South American region. With an annual growth rate of growth averaging 7%, the fact that the infrastructural development in the region has contributed to the expansion of the economic portfolio is not in doubt (Lo and Hiscok 201).
Cassiolato foresees a stalled growth for the BRIC countries if the Western powers strategically place themselves to imbibe the external growth factors that the BRIC countries are currently enjoying. While this may not be necessarily a threat to the balance of the world economy, it is surely a game changer for the BRIC countries (114). Currently, the controversial issue regarding currency devaluation in China as a factor of encouraging the local manufacturing and service sectors is being contested by several other nations. The US for instance, is accusing China of “decimating” imports through this “retrogressive” currency devaluation policy. According to economists, arbitration into this phenomenon is likely to shift the global economic seesaw tremendously. Marino avers that the issue of fiscal deficit amongst the BRIC countries is the “elephant in the room (44)” The fiscal deficit in these economies has left no gap for priority areas especially in the social context (Ghosh 97).Except Russia; the other three countries have indigent social policies. Other threats include the garbled labor policies and the pollution associated with the industrial sector (Lo and Hiscok 221).
Ghosh, Jayati. Model of BRICs’ economic development and challenges for EU competitiveness. Washington, DC: Thomas Nelson Inc, 2011. Print.
Lo, V. I., and M. Hiscock. The Rise of the BRICS in the Global Political Economy Changing Paradigms?. Cheltenham: Edward Elgar Publishing, 2014. Print.
Marino, Rich. Submerging Markets the Impact of Increased Financial Regulations on the Future Growth Rates of BRICS Countries.. Basingstoke: Palgrave Macmillan, 2012. Print.
Neill, Jim. The growth map: economic opportunity in the BRICs and beyond. New York: Portfolio / Penguin, 2013. Print.