A Project report on

significance of bric in international business

and

economic development

Under the guidance of

Faculty guide submitted by

Mrs. Rajlaxmi shreenath amandeep singh

---------------------------------------------------------------- Maharishi Arvind Institute of Science & Management

Ambabari Circle, Ambabari, Jaipur-302 023 INDIA.

Tel: +91-141-2335487, 2234216 Telefax: +91-141-2335120 E-mail: maism@datainfosys.net , maism@maism.com

Certificate of Originality

1

I, Amandeep Singh, s/o Sh Santokh Singh, having Enrollment No 3325 of Batch

2008-10, do hereby certify and declare that this research report titled SIGNIFICANCE

OF BRIC IN INTERNATIONAL BUSINESS AND ECONOMIC DEVELOPMENT

is the result of my own work. This report contains no materials or information which has

been previously submitted for any other academic diploma or degree, except where

indicated otherwise.

Date: Amandeep Singh

Approval Certificate

2

This report, entitled SIGNIFICANCE OF BRIC IN INTERNATIONAL BUSINESS

AND ECONOMIC DEVELOPMENT, prepared and submitted by AMANDEEP

SINGH, in partial fulfillment of the requirements for the degree of PGDM is hereby

accepted.

Mrs Rajlaxmi Shreenath

Accepted as partial fulfillment of the requirements for the 2-Year Full-Time

PGDM COURSE.

Dean (Academics)

3

ACKNOWLEDGEMENT

Completion of any task is impossible without guidance, support and, of course, blessings

of Almighty. I had the inspiration and blessings of the Almighty, who helped me at every

turn of this task, from preface to the back cover of this research report.

Completing the task is never a one man effort. It is often the result of valuable

contribution of number of individual in direct or indirect manner that help in shaping and

achievement of objectives. At the very outset, I would like to acknowledge the valuable

help of some people without their contribution it would not be possible to complete this

project report.

I would like to thanks Mrs. Rajlaxmi Shreenath as a Faculty Guide and for providing us

with the opportunity to work on this enormous and dynamic project on SIGNIFICANCE

OF BRIC IN INTERNATIONAL BUSINESS AND ECONOMIC GROWTH.

I would also like to thanks to Dean Aacademics Mr. A. S. Bhamra and HOD Mr. Vipin

Jain on his immense support and guidance during my project.

Their deep erudition and mastery over the subject and ungrudging help continuously

inspired me at every stage and enabled me to face the difficulties. They have supervised

my work with never shaking patience and always imparted direction to my work. No

words can be adequate to express my indebtedness to them.

I would like to express our heart-full thanks to Mr. Bharat Prashar, Director, Maharishi

Arvind Institute of Science and Management, Jaipur for his immense support and kind

help in bringing this project report in its final shape.

4

TABLE OF CONTENTS:

INTRODUCTION 8-10

FREE TRADE AGREEMENT 11-12

BRIC AGREEMENT 13-15

BRIC THESIS 15-21

BRIC IN FUTURE 22-27

COMPARATIVE ANALYSIS OF BRIC COUNTRIES 28-32

CRITICISM 33-35

BRIC & MARKETING 36-37

FINDINGS 38

CONCLUSION 39

BIBLIOGRAPHY 40

5

ABSTRACT

The report deal with BRIC countries (Brazil, Russia, India, China) and significance of BRIC in international business and economic growth of India.

Dreaming with BRIC: The path to 2050: is an economic study released in 2003 by financial giant Goldman Sachs.

The report focused on four developing countries: Brazil, Russia, India, China. It is predicted that these four nation ‘Economies’ could grow to be bigger than the entire group of G6 leading industrialized countries which include the United States, Japan, United Kingdom, Germany, France and itlay.

The report went on to suggest that the BRIC countries would become not only the primary source of manufacturing and the major supplier of commodities but also significant consumer.

A company which has ability to understand and appreciate another culture and customs will have the most success in international arena.

This report emphasis the effect of BRIC agreement on growth of Indian economy because market selection make a difference in International Business and it benefited both companies and national economies also.

6

INTRODUCTION:

7

International trade is exchange of capital, goods and services across international

borders or territories. It refers to exports of goods and services by a firm to a foreign-

based buyer (importer). In most countries, it represents a significant share of gross

domestic product (GDP). While international trade has been present throughout much

of history (see Silk Road, Amber Road), its economic, social, and political importance

has been on the rise in recent centuries.

Industrialization, advanced transportation, globalization, multinational corporations, and

outsourcing are all having a major impact on the international trade system. Increasing

international trade is crucial to the continuance of globalization. International trade is a

major source of economic revenue for any nation that is considered a world power.

Without international trade, nations would be limited to the goods and services produced

within their own borders.

GOLDMAN SACHS BRIC STUDY

BRIC( Brazil, Russia, India, and China)

BRIC economies to be larger than the G-6 economies in less than 40 years.

China overtakes US economy in size in less than 30 years

New demand from BRIC economies would rival that of current G-6 economies in

less than a decade.

India and China’s rapid industrialization will push the world economic growth

rate to 4%

BRIC’s share of the world economy will rise from less than 10% (at present) to

over 20% in two decades.

By 2050, only US and Japan will remain in the top six economies of the world.

8

Top trading nations

Rank Country Exports + Imports Date of

  information

   

-   European Union $3,642,000,000,000 2007 est.

1   United States $2,439,700,000,000 2009 est.

2   Germany $2,209,000,000,000 2009 est.

3   People's Republic of China $2,115,500,000,000 2009 est.

4   Japan $1,006,900,000,000 2009 est.

5   France $989,000,000,000 2009 est.

6   United Kingdom $824,900,000,000 2009 est.

7   Netherlands $756,500,000,000 2009 est.

8   Italy $727,700,000,000 2009 est.

-   Hong Kong $672,600,000,000 2009 est.

9   South Korea $668,500,000,000 2009 est.

10   Belgium $611,100,000,000 2009 est.

11   Canada $603,700,000,000 2009 est.

12   Spain $508,900,000,000 2009 est.

13   Russia $492,400,000,000 2009 est.

14   Mexico $458,200,000,000 2009 est.

15   Singapore $454,800,000,000 2009 est.

16   India $387,300,000,000 2009 est.

17   Taiwan $371,400,000,000 2009 est.

18   Switzerland $367,300,000,000 2009 est.

19   Australia $322,400,000,000 2009 est.

20   United Arab Emirates $315,000,000,000 2009 est.

9

In the years since the Second World War, controversial multilateral treaties like the

General Agreement on Tariffs and Trade (GATT) and World Trade Organization have

attempted to promote free trade while creating a globally regulated trade structure. These

trade agreements have often resulted in discontent and protest with claims of unfair trade

that is not beneficial to developing countries.\Free trade is usually most strongly

supported by the most economically powerful nations, though they often engage in

selective protectionism for those industries which are strategically important such as the

protective tariffs applied to agriculture by the United States and Europe. The Netherlands

and the United Kingdom were both strong advocates of free trade when they were

economically dominant, today the United States, the United Kingdom, Australia and

Japan are its greatest proponents. However, many other countries (such as India, China

and Russia) are increasingly becoming advocates of free trade as they become more

economically powerful themselves. As tariff levels fall there is also an increasing

willingness to negotiate non tariff measures, including foreign direct investment,

procurement and trade facilitation. The latter looks at the transaction cost associated with

meeting trade and customs procedures.

10

FREE TRADE:

Free trade is a system of trade policy that allows traders to act and or transact without

interference from government. According to the law of comparative advantage the policy

permits trading partners mutual gains from trade of goods and services.

Under a free trade policy, prices are a reflection of true supply and demand, and are the

sole determinant of resource allocation. Free trade differs from other forms of trade

policy where the allocation of goods and services amongst trading countries are

determined by artificial prices that may or may not reflect the true nature of supply and

demand. These artificial prices are the result of protectionist trade policies, whereby

governments intervene in the market through price adjustments and supply restrictions.

Such government interventions can increase as well as decrease the cost of goods and

services to both consumers and producers.

Interventions include subsidies, taxes and tariffs, non-tariff barriers, such as regulatory

legislation and quotas, and even inter-government managed trade agreements such as the

North American Free Trade Agreement (NAFTA) and Central America Free Trade

Agreement (CAFTA) (contrary to their formal titles) and any governmental market

intervention resulting in artificial prices.

Most states conduct trade policies that are to a lesser or greater degree protectionist. One

ubiquitous protectionist policy employed by states comes in the form of agricultural

subsidies whereby countries attempt to protect their agricultural industries from outside

competition by creating artificial low prices for their agricultural goods.

Free trade agreements are a key element of customs unions and free trade areas.

11

Features of free trade

Trade of goods without taxes (including tariffs) or other trade barriers (e.g.,

quotas on imports or subsidies for producers)

Trade in services without taxes or other trade barriers

The absence of "trade-distorting" policies (such as taxes, subsidies, regulations, or

laws) that give some firms, households, or factors of production an advantage

over others

Free access to markets

Free access to market information

Inability of firms to distort markets through government-imposed monopoly or

oligopoly power

The free movement of labor between and within countries

The free movement of capital between and within countries

12

13

14

BRIC AGREEMENT:

Global giants

Painting BRIC by numbers

Lists   Brazil   Russia   India   China

Countries by total area 5th 1st 7th 3rd

Countries by population 5th 9th 2nd 1st

Countries by gross domestic product 10th 11th 12th 4th

Countries by exports 21st 11th 25th 2nd

Countries by imports 26th 17th 16th 2nd

Countries by current account balance 29th 5th 154th 1st

Countries by received FDI 16th 12th 32nd 5th

Countries by foreign exchange reserves 7th 3rd 4th 1st

Countries by external debt 25th 20th 29th 22nd

Countries by public debt 47th 117th 29th 98th

Countries by electricity consumption 10th 3rd 7th 2nd

Countries by number of mobile phones 6th 4th 2nd 1st

Countries by number of internet users 6th 11th 5th 1st

15

The acronym was prominently used by Jim O'Neill of Goldman Sachs in

2001.According to a paper published in 2005, Mexico and South Korea are the only other

countries comparable to the BRICs, but their economies were excluded initially because

they were considered already more develope. Goldman Sachs argued that, since they are

developing rapidly, by 2050 the combined economies of the BRICs could eclipse the

combined economies of the current richest countries of the world. The four countries,

combined, currently account for more than a quarter of the world's land area and more

than 40% of the world's population. Goldman Sachs did not argue that the BRICs would

organize themselves into an economic bloc, or a formal trading association, as the

European Union has done. However, there are some indications that the "four BRIC

countries have been seeking to form a 'political club' or 'alliance'", and thereby converting

"their growing economic power into greater geopolitical clout"On June 16, 2009, the

leaders of the BRIC countries held their first summit in Yekaterinburg, and issued a

declaration calling for the establishment of a multipolar world order.

The BRIC thesis

Goldman Sachs argues that the economic potential of Brazil, Russia, India and China is

such that they could become among the four most dominant economies by the year 2050.

The thesis was proposed by Jim O'Neill, global economist at Goldman Sachs. These

countries encompass over 25% of the world's land coverage and 40% of the world's

population and hold a combined GDP (PPP) of 15.435 trillion dollars. On almost every

scale, they would be the largest entity on the global stage. These four countries are

among the biggest and fastest growing emerging markets.

However, it is not the intent of Goldman Sachs to argue that these four countries are a

political alliance (such as the European Union) or any formal trading association, like

ASEAN. Nevertheless, they have taken steps to increase their political cooperation,

mainly as a way of influencing the United States position on major trade accords, or,

through the implicit threat of political cooperation, as a way of extracting political

concessions from the United States, such as the proposed nuclear cooperation with India.

16

BRIC in 2050

Gross Domestic Product [2007] Gross Domestic Product [2050]

Rank CountryGDP (millions

of USD)Rank Country

GDP (millions

of USD)

1  United

States13,843,825 1   China 78,000,000

2   Japan 4,383,762 2   United States 38,500,000

3   Germany 3,322,147 3   India 37,600,000

4   China 3,250,827 4   Brazil 11,300,000

5  United

Kingdom2,772,570 5   Russia 9,340,000

6   France 2,560,255 6   Mexico 8,580,000

7   Italy 2,104,666 7   Indonesia 7,010,000

8   Spain 1,438,959 8   Japan 6,670,000

9   Canada 1,432,140 9   United Kingdom 5,130,000

10   Brazil 1,313,590 10   Germany 5,020,000

11   Russia 1,289,582 11   France 4,640,000

12   India 1,098,945 12   Nigeria 4,590,000

13  South

Korea957,053 13   South Korea 4,080,000

14   Australia 908,826 14   Turkey 3,940,000

15   Mexico 893,365 15Template:Country

data serbia3,600,000

17

The BRIC thesis recognizes that Brazil, Russia, India and China have changed their

political systems to embrace global capitalism. Goldman Sachs predicts China and India,

respectively, to be the dominant global suppliers of manufactured goods and services

while Brazil and Russia would become similarly dominant as suppliers of raw materials.

Cooperation is thus hypothesized to be a logical next step among the BRICs because

Brazil and Russia together form the logical commodity suppliers to India and China.

Thus, the BRICs have the potential to form a powerful economic bloc to the exclusion of

the modern-day states currently of "Group of Eight" status. Brazil is dominant in soy and

iron ore while Russia has enormous supplies of oil and natural gas. Goldman Sachs'

thesis thus documents how commodities, work, technology and companies have diffused

outward from the United States across the world.

Following the end of the Cold War or even before, the governments comprising BRIC all

initiated economic or political reforms to allow their countries to enter the world

economy. In order to compete, these countries have simultaneously stressed education,

foreign investment, domestic consumption and domestic entrepreneurship.

18

The Goldman Sachs global economics team released a follow-up report to its initial

BRIC study in 2004. The report states that in BRIC nations, the number of people with an

annual income over a threshold of $3,000, will double in number within three years and

reach 800 million people within a decade. This predicts a massive rise in the size of the

middle class in these nations. In 2025, it is calculated that the number of people in BRIC

nations earning over $15,000 may reach over 200 million. This indicates that a huge

pickup in demand will not be restricted to basic goods but impact higher-priced goods as

well. According to the report, first China and then a decade later India will begin to

dominate the world economy.

Yet despite the balance of growth, swinging so decisively towards the BRIC economies,

the average wealth level of individuals in the more advanced economies will continue to

far outstrip the BRIC economic average. Goldman Sachs estimates that by 2025 the

income per capita in the six most populous EU countries will exceed $35,000, whereas

only about 500 million people in the BRIC economies will have similar income levels.

19

The report also highlights India's great inefficiency in energy use and mentions the

dramatic under-representation of these economies in the global capital markets. The

report also emphasizes the enormous populations that exist within the BRIC nations,

which makes it relatively easy for their aggregate wealth to eclipse the G6, while per-

capita income levels remain far below the norm of today's industrialized countries. This

phenomenon, too, will affect world markets as multinational corporations will attempt to

take advantage of the enormous potential markets in the BRICs by producing, for

example, far cheaper automobiles and other manufactured goods affordable to the

consumers within the BRICs in lieu of the luxury models that currently bring the most

income to automobile manufacturers. India and China have already started making their

presence felt in the service and manufacturing sector respectively in the global arena.

Developed economies of the world have already taken serious note of this fact.

A Goldman Sachs paper published later in December 2005 explained why Mexico and

South Korea were not included in the original BRICs. According to the paper, among the

other countries they looked at, only Mexico and South Korea have the potential to rival

the BRICs, but they are economies that they decided to exclude initially because they

looked at them as already more developed.

20

Pudong, Shanghai, China.

This report compiled by lead authors Tushar Poddar and Eva Yi gives insight into

"India's Rising Growth Potential". It reveals updated projection figures attributed to the

rising growth trends in India over the last four years. Goldman Sachs assert that "India's

influence on the world economy will be bigger and quicker than implied in our

previously published BRICs research". They noted significant areas of research and

development, and expansion that is happening in the country, which will lead to the

prosperity of the growing middle-class.

"India has 10 of the 30 fastest-growing urban areas in the world and, based on current

trends, we estimate a massive 700 million people will move to cities by 2050. This will

have significant implications for demand for urban infrastructure, real estate, and

services."[14]

21

In the revised 2007 figures, based on increased and sustaining growth, more inflows into

foreign direct investment, Goldman Sachs predicts that "from 2007 to 2020, India's GDP

per capita in US$ terms will quadruple", and that the Indian economy will surpass the

United States (in US$) by 2050. It states that the four nations as a group will overtake the

G7 in 2032.

The BRIC numbers

The Economist publishes an annual table of social and economic national statistics in its

Pocket World in Figures. Extrapolating the global rankings from their 2008 Edition for

the BRIC countries and economies in relation to various categories provides an

interesting touchstone in relation to the economic underpinnings of the BRIC thesis. It

also illustrates how, despite their divergent economic bases, the economic indicators are

remarkably similar in global rankings between the different economies. It also suggests

that, while economic arguments can be made for linking Mexico into the BRIC thesis, the

case for including South Korea looks considerably weaker. A Goldman Sachs paper

published later in December 2005 explained why Mexico wasn't included in the original

BRICs. According to the paper,[3] among the other countries they looked at, only Mexico

and perhaps Korea have the potential to rival the BRICs, but they are economies that they

decided to exclude initially because they looked at them as already more developed.

According to that paper, Mexico becomes the fifth-largest economy by 2050, ahead of

Russia.

Painting BRIC by numbers

Categories Brazil Russia India China

Area 5th 1st 7th 3rd

22

Population 5th 9th 2nd 1st

Population growth rate 107th 221th 90th 156th

Labour force 5th 6th 2nd 1st

GDP (nominal) 10th 8th 12th 3rd

GDP (PPP) 9th 6th 4th 2nd

GDP (nominal) per capita 63rd 52nd 143rd 104th

GDP (PPP) per capita 77th 52nd 130th 100th

GDP (real) growth rate 81st 69th 28th 16th

Human Development Index 75th 71st 134th 92nd

Exports 21st 11th 23rd 1st

Imports 27th 17th 16th 2nd

Current account balance 47th 5th 169th 1st

Received FDI 11th 12th 29th 5th

Foreign exchange reserves 7th 3rd 5th 1st

External debt 24th 20th 27th 19th

Public debt 47th 117th 29th 98th

Electricity consumption 10th 3rd 7th 2nd

Number of mobile phones 5th 4th 2nd 1st

Number of internet users 5th 11th 4th 1st

Motor vehicle production 6th 12th 9th 2nd

Military expenditures 12th 8th 9th 2nd

Active troops 14th 5th 3rd 1st

Cultivated land 5th 4th 2nd 3rd

Forest area 2nd 1st 10th 5th

Waterways length 3rd 2nd 9th 1st

Rail network 10th 2nd 4th 3rd

Road network 4th 8th 3rd 2nd

23

BRIC in future

The list of the top 22 countries by nominal GDP from year 2006 to 2050.

The bottom chart list are the top 22 countries by nominal GDP per

capita (the rankings for this bottom chart do not reflect the GDP per

capita for all the world's countries). BRIC countries are highlighted and

labeled in bold. Figures reflect data published in 2007.

Gross Domestic Product (nominal) [2006-2050] (in US$ billions)[15]

Rank

Country 2006 2010 2015 2020 2025 2030 2035 2040 2045 2050

1 United States

13,245

14,535

16,194

17,978

20,087

22,817

26,097

29,823

33,904

38,514

2 Japan 4,336 4,604 4,861 5,224 5,570 5,814 5,886 6,042 6,300 6,677

3 Germany 2,851 3,083 3,326 3,519 3,631 3,761 4,048 4,388 4,714 5,024

4 China 2,682 4,667 8,13312,63

018,43

725,61

034,34

845,02

257,31

070,71

0

5 United

Kingdom2,310 2,546 2,835 3,101 3,333 3,595 3,937 4,344 4,744 5,133

6 France 2,194 2,366 2,577 2,815 3,055 3,306 3,567 3,892 4,227 4,592

7 Italy 1,809 1,914 2,072 2,224 2,326 2,391 2,444 2,559 2,737 2,950

8 Canada 1,260 1,389 1,549 1,700 1,856 2,061 2,302 2,569 2,849 3,149

9 Brazil 1,064 1,346 1,720 2,194 2,831 3,720 4,963 6,631 8,74011,36

6

10 Russia 982 1,371 1,900 2,554 3,341 4,265 5,265 6,320 7,420 8,580

11 India 909 1,256 1,900 2,848 4,316 6,68310,51

416,51

025,27

837,66

8

12 South Korea

887 1,071 1,305 1,508 1,861 2,241 2,644 3,089 3,562 4,083

13 Mexico 851 1,009 1,327 1,742 2,303 3,068 4,102 5,471 7,204 9,340

14 Turkey 390 440 572 740 965 1,279 1,716 2,300 3,033 3,943

15 Indonesia 350 419 562 752 1,033 1,479 2,192 3,286 4,846 7,010

16 Iran 245 312 415 544 716 953 1,273 1,673 2,133 2,663

17 Pakistan 129 161 206 268 359 497 709 1,026 1,472 2,085

18 Nigeria 121 158 218 306 445 680 1,083 1,765 2,870 4,640

19 Philippine

s117 162 215 289 400 582 882 1,353 2,040 3,010

20 Egypt 101 129 171 229 318 467 718 1,124 1,728 2,602

21 Banglades

h63 81 110 150 210 304 451 676 1,001 1,466

24

22 Vietnam 55 88 157 273 458 745 1,169 1,768 2,569 3,607

The five largest economies in the world in 2050, measured in GDP nominal (millions of

USD), according to Goldman Sachs.

Gross Domestic Product per capita (nominal) [2006-2050]

Rank Country 2006 2010 2015 2020 2025 2030 2035 2040 2045 2050

1   United States 44,379 47,014 50,200 53,502 57,446 62,717 69,019 76,044 83,489 91,683

2  United

Kingdom38,108 41,543 45,591 49,173 52,220 55,904 61,049 67,391 73,807 80,234

3   Canada 38,071 40,541 43,449 45,961 48,621 52,663 57,728 63,464 69,531 76,002

4   France 36,045 38,380 41,332 44,811 48,429 52,327 56,562 62,136 68,252 75,253

5   Germany 34,588 37,474 40,589 43,223 45,033 47,263 51,710 57,118 62,658 68,253

6   Japan 34,021 36,194 38,650 42,385 46,419 49,975 52,345 55,756 60,492 66,846

7   Italy 31,123 32,948 35,908 38,990 41,358 43,195 44,948 48,070 52,760 58,545

8   South Korea 18,161 21,602 26,012 29,868 36,813 44,602 53,449 63,924 75,979 90,294

9   Mexico 7,918 8,972 11,176 13,979 17,685 22,694 29,417 38,255 49,393 63,149

10   Russia 6,909 9,833 13,971 19,311 26,061 34,368 43,800 54,221 65,708 78,576

11   Brazil 5,657 6,882 8,427 10,375 12,996 16,694 21,924 29,026 38,149 49,759

12   Turkey 5,545 6,005 7,460 9,291 11,743 15,188 20,046 26,602 34,971 45,595

13   Iran 3,768 4,652 5,888 7,345 9,328 12,139 15,979 20,746 26,231 32,676

14   China 2,041 3,463 5,837 8,829 12,688 17,522 23,511 30,951 39,719 49,650

15   Indonesia 1,508 1,724 2,197 2,813 3,711 5,123 7,365 10,784 15,642 22,395

16   Philippines 1,312 1,688 2,075 2,591 3,372 4,635 6,678 9,815 14,260 20,388

17   Egypt 1,281 1,531 1,880 2,352 3,080 4,287 6,287 9,443 14,025 20,500

18   Nigeria 919 1,087 1,332 1,665 2,161 2,944 4,191 6,117 8,934 13,014

19   India 817 1,061 1,492 2,091 2,979 4,360 6,524 9,802 14,446 20,836

20   Pakistan 778 897 1,050 1,260 1,568 2,035 2,744 3,775 5,183 7,066

21   Vietnam 655 1,001 1,707 2,834 4,583 7,245 11,148 16,623 23,932 33,472

22   Bangladesh 427 510 627 790 1,027 1,384 1,917 2,698 3,767 5,235

25

BRIC Summit

The BRIC countries met for their first official summit on 16 June 2009, in Yekaterinburg,

Russia, with Luiz Inácio Lula da Silva, Dmitry Medvedev, Manmohan Singh, and Hu

Jintao, the respective leaders of Brazil, Russia, India and China, all attending. The core

focus of the summit was related to improving the current global economic situation and

discussing how the four countries can better work together in the future, as well as a more

general push to reform financial institutions. There was also discussion surrounding how

developing nations, such as those members of BRIC, could be better involved in global

affairs in the future. In the aftermath of the summit the BRIC nations suggested that there

was a need for a new global reserve currency that is 'diversified, stable and predictable'.

The statement that was released stopped short of making a direct attack on the perceived

'dominance' of the US dollar, something which the Russians have been critical of;

however, it still led to a fall in the value of the dollar against other major currencies.

The foreign ministers of the BRIC countries had met previously on May 16, 2008 also in

Yekaterinburg.

One week prior to the summit, Brazil offered $10 billion to the International Monetary

Fund.[21] It was the first time that the country had ever made such a loan. Brazil had

previously received loans from the IMF and this announcement was treated as a

significant demonstration of how Brazil's economic position had changed. China also

announced plans to invest a total of $50.1 billion and Russia planned to invest $10

billion.[21]

Date Host country Host leader Location held

1st 16-Jun-09   Russia Dmitry Medvedev Yekaterinburg

2nd 16-Apr-10   Brazil Luiz Inácio Lula da Silva Brasília

26

The BRIC term

The BRIC leaders in 2008

Various sources (see external links below) refer to a purported "original" BRIC

agreement that predates the Goldman Sachs thesis. Some of these sources claim that

President Vladimir Putin of Russia was the driving force behind this original cooperative

coalition of developing BRIC countries. However, thus far, no text has been made public

of any formal agreement to which all four BRIC states are signatories. This does not

mean, however, that they have not reached a multitude of bilateral or even trilateral

agreements. Evidence of agreements of this type are abundant and are available on the

foreign ministry websites of each of the four countries. Trilateral agreements and

frameworks made among the BRICs include the Shanghai Cooperation Organization

(member states include Russia and China, associate members include India) and the

IBSA Trilateral Forum, which unites Brazil, India, and South Africa in annual dialogues.

27

Also important to note is the G-20 coalition of developing states which includes all the

BRICs.

Also, because of the popularity of the Goldman Sachs thesis "BRIC", this term has

sometimes been extended whereby "BRICK" (K for South Korea), "BRIMC" (M for

Mexico), "BRICA" (GCC Arab countries – Saudi Arabia, Qatar, Kuwait, Bahrain, Oman

and the United Arab Emirates) and "BRICET" (including Eastern Europe and Turkey)

have become more generic marketing terms to refer to these emerging markets.

The BRIC term is also used by companies who refer to the four named countries as key

to their emerging markets strategies. By comparison the reduced acronym IC would not

be attractive, although the term "Chindia" is often used. The BRIC's study specifically

focuses on large countries, not necessarily the wealthiest or the most productive and was

never intended to be an investment thesis. If investors read the Goldman's research

carefully, and agreed with the conclusions, then they would gain exposure to Asian debt

and equity markets rather than to Latin America. According to estimates provided by the

USDA, the wealthiest regions outside of the G6 in 2015 will be Hong Kong, South Korea

and Singapore. Combined with China and India, these five economies are likely to be the

world's five most influential economies outside of the G6.

On the other hand, when the "R" in BRIC is extended beyond Russia and is used as a

loose term to include all of Eastern Europe as well, then the BRIC story becomes more

compelling. At issue are the multiple serious problems which confront Russia (potentially

unstable government, environmental degradation, critical lack of modern infrastructure,

etc[citation needed]), and the comparatively much lower growth rate seen in Brazil. However,

Brazil's lower growth rate obscures the fact that the country is wealthier than China or

India on a per-capita basis, has a more developed and global integrated financial system

and has an economy potentially more diverse than the other BRICs due to its raw

material and manufacturing potential. Many other Eastern European countries, such as

Poland, the Czech Republic, Slovakia, Hungary, Romania, Bulgaria, and several others

were able to continually sustain high economic growth rates and do not experience some

of the problems that Russia experiences or experience them to a lesser extent. In terms of

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GDP per capita in 2008, Brazil ranked 64th, Russia 42nd, India 113th and China 89th. By

comparison South Korea ranked 24th and Singapore 3rd.

Brazil's stock market, the Bovespa, has gone from approximately 9,000 in September

2002 to over 70,000 in May 2008. Government policies have favored investment

(lowering interest rates), retiring foreign debt and expanding growth, and a reformulation

of the tax system is being voted in the congress. The British author and researcher Mark

Kobayashi-Hillary is editing a new book titled 'Building a Future with BRICs' for

European publisher Springer Verlag that examines the growth of the BRICs region and

its effect on global sourcing. Contributors to the book include Nandan Nilekani, and Shiv

Nadar, with publication scheduled for October 2007.

29

ANALYSIS:

Comparative analysis of GDPYEAR 2006 2010 2020 2030 2040 2050Brazil 1064 1346 2194 3720 45022 70710Russia 982 1371 2554 4265 6320 8580India 909 1256 2848 6683 16510 33668China 2682 4667 12630 25610 45022 70710

High economic growth; the BRICs economies are continuing to grow strongly.

Huge potential growth; Goldman Sachs Report (October 2003, updated December

2005)

Outlook on BRICs’ economic growth up to 2050, based upon the rate of

economic growth and forex rate. The size of the BRICs economy will be

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comparable to the G7 nations in 2040. The ranking in terms of the size of the

economy in 2050 will be (1) China, (2) US, (3) India, (4) Japan, (5) Brazil, (6)

Mexico, and (7)Russia.

Per Capita Real GDPYear 2003 2008Brazil 7359.5 9824.5Russia 8719.7 11285.7India 2731.9 6382.8China 4726.4 8258.9

BRICs – a 10% player in the global economy:

Total land area: 29%. Population: 43% of the world.

Nominal GDP: 9%. Exports 10% share. Foreign direct investment 6%. Foreign

reserves: 24% of the world.

In terms of per-capita GDP, the BRICs economies are equivalent to the average

developing nation. Interms of income levels, Brazil and Russia stand on par with

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Japan in the second half of the 1960s, China is on par with Japan around 1960 and

India is on part with Japan in the first half of the 1950s.

Unit Energy Consumption By BRICBrazil 300Russia 100India 500China 800

Energy demand among the BRICs is rising due to economic growth

Energy demand among the four BRICs countries is rising amid solid economic

growth in recent years.

Unit energy consumption (energy consumption per unit of GDP output) among

the BRICs is very high.

Primary energy consumption among the BRICs rose 61.7% from 1985 to 2004,

while global primary energy consumption increased 42.1% (contribution by

BRICs: 33.2%). As a result, the percentage share of BRICs’ primary energy

consumption in the world rose from 22.7% in 1985 to 25.8% in 2004.

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On the supply side, Russia gained importance as an exporter of crude oil and

natural gas.The three B(R)ICs countries other than Russia are all net importers of

crude oil.

Foreign Reserves (Million

US$) Ratio to imports (months)Ratio to shory-term

external debt (times) 1996 2004 1996 2004 1996 2004

Brazil 58323 52740 10.6 7.9 1.11 1.33Russia 11276 120809 1.56 11.14 0.42 3.72India 20170 126593 4.4 16.17 2.65 4.97China 107039 614500 8.33 12.16 3.8 12.38

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Rising impact of the BRICs in global financial markets

The BRICs share part of the global imbalance.

The US current account deficit (capital imports) and the current account surplus (capital

exports) of emerging and oil producing countries including the BRICs. Capital

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movements run counter to the "common assumption” that capital flows from developed

countries to developing countries.Recent capital exports by emerging countries stem

mainly from rising foreign exchange reserves.

In the background to the rise of foreign exchange reserves, there are "self-insurance"

motives against financial crises. However, the reserves are surpassing targets and may be

reaching excessive levels.

Criticism

A criticism is that the BRIC projections are based on the assumptions that resources are

limitless and endlessly available when needed. In reality, many important resources

currently necessary to sustain economic growth, such as oil, natural gas, coal, other fossil

fuels, and uranium might soon experience a peak in production before enough renewable

energy can be developed and commercialized, which might result in slower economic

growth than anticipated, thus throwing off the projections and their dates. The economic

emergence of the BRICs will have unpredictable consequences for the global

environment. Indeed, proponents of a set carrying capacity for the Earth may argue that,

given current technology, there is a finite limit to how much the BRICs can develop

before exceeding the ability of the global economy to supply.

Academics and experts have suggested that China is in a league of its own compared to

the other BRIC countries.[29] As David Rothkopf wrote in Foreign Policy, "Without

China, the BRICs are just the BRI, a bland, soft cheese that is primarily known for the

whine that goes with it. China is the muscle of the group and the Chinese know it. They

have effective veto power over any BRIC initiatives because without them, who cares

really? They are the one with the big reserves. They are the biggest potential market.

They are the U.S. partner in the G2 (imagine the coverage a G2 meeting gets vs. a G8

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meeting) and the E2 (no climate deal without them) and so on." Deutsche Bank Research

said in a report that "economically, financially and politically, China overshadows and

will continue to overshadow the other BRICs." It added that China's economy is larger

than that of the three other BRIC economies (Brazil, Russia and India) combined.

Moreover, China's exports and its official forex reserve holdings are more than twice as

large as those of the other BRICs combined.

Another criticism is the understatement of GDP growth in China over the next 45 years;

which predicts growth falling far below normal development. This contradicts the rapid

economic growth that has already taken place in the country and the experience of

countries like South Korea catching up with western GDP per capita, which China has

been growing faster than in a similar period of development. There are many

uncertainties and assumptions in the BRIC thesis that could mean that any or all of these

four countries will not live up to their promise. The preeminence of China and India as

major manufacturing countries with unrealised potential has been widely recognised, but

some commentators state that China's and Russia's disregard for human rights and

democracy could be a problem in the future, as is the possibility of conflict over Taiwan

in the case of China. Likewise, the population of Russia is steadily aging, and Brazil's

and China's populations will begin to decline in several decades, and with their

demographic windows closing in several decades as well. This may have implications for

those countries' future, for there might be a decrease in the overall labor force and a

negative change in the proportion of workers to retirees.

Brazil's economic potential has been anticipated for decades, but it had until recently

consistently failed to achieve investor expectations. Only in recent years has the country

established a framework of political, economic, and social policies that allowed it to

resume consistent growth. The result has been solid and paced economic development

that rival its early 70's "miracle years", as reflected in its expanding capital markets,

lowest unemployment rates in decades, and consistent international trade surpluses - that

led to the accumulation of reserves and liquidation of foreign debt (earning the country a

coveted investment grade by the S&P and Fitch Ratings in 2008). How long such positive

factors will stay in place remains to be seen.

36

Finally, India's relations with its neighbor Pakistan have always been tense. In 1998,

there was a nuclear standoff between Pakistan and India. Border conflicts with Pakistan,

mostly over the longheld dispute over Kashmir, has further aggravated any economic ties.

The BRIC countries have enormous populations of extremely impoverished people. This

impedes progress by limiting government finances, increasing social unrest, and limiting

potential domestic economic demand. Factors such as international conflict, civil unrest,

unwise political policy, outbreaks of disease and terrorism are all factors that are difficult

to predict and that could have an effect on the destiny of any country.

Other critics suggest that BRIC is nothing more than a neat acronym for the four largest

emerging market economies, but in economic and political terms nothing else (apart from

the fact that they are all big emerging markets) links the four. Two are manufacturing

based economies and big importers (China and India), but two are huge exporters of

natural resources (Brazil and Russia). The Economist, in its special report on Brazil,

expressed the following view: "In some ways Brazil is the steadiest of the BRICs. Unlike

China and Russia it is a full-blooded democracy; unlike India it has no serious disputes

with its neighbors. It is the only BRIC without a nuclear bomb." The Heritage

Foundation's "Economic Freedom Index", which measures factors such as protection of

property rights and free trade ranks Brazil ("moderately free") above the other BRICs

("mostly unfree").

It is also noticed that BRIC countries have undermined qualitative factors that is reflected

in deterioration in Doing Business ranking 2010 and other several human indexes.

In a not-so-subtle dig critical of the term as nothing more than a shorthand for emerging

markets generally, critics have suggested a correlating term, CEMENT (Countries in

Emerging Markets Excluded by New Terminology). Whilst they accept there has been

spectacular growth of the BRIC economies, these gains have largely been the result of the

strength of emerging markets generally, and that strength comes through having BRICs

and CEMENT.

37

BRIC and Marketing

The BRIC term is also used by companies who refer to the four named countries as key

to their emerging markets strategies. In reality, the use of this acronym often obscures a

lesser role given to Brazil, and sometimes to Russia too. In reality Russia and Brazil will

be dwarfed by both China and India in 2050, and the rest of Asia combined will also be

much larger in terms of GDP than either Russia or Brazil. Nevertheless the BRIC

acronym has been widely adopted. By comparison the reduced acronym IC (English

"ick") would not be attractive, although the term "Chindia" is often used. The BRIC's

study specifically focuses on LARGE countries, not necessarily the wealthiest or the

most productive and was never intended to be an investment thesis. If investors read the

Goldman's research carefully, and agreed with the conclusions, then they would gain

exposure to Asian debt and equity markets rather than to Latin America. According to

estimates provided by the USDA, the wealthiest regions outside of the G6 in 2015 will be

Hong Kong, South Korea and Singapore. Combined with China and India, these five

economies are likely to be the world's five most influential economies outside of the G6.

On the other hand, when the "R" in BRIC is extended beyond Russia and is used as a

loose term to include all of Eastern Europe as well, then the BRIC story becomes more

compelling. At issue are the multiple serious problems which confront Russia (declining

population, potentially unstable government, environmental degradation, critical lack of

modern infrastructure, etc), and the comparatively much lower growth rate seen in Brazil.

38

However, Brazil's lower growth rate obscures the fact that the country is wealthier than

China or India on a per-capita basis, has a more developed and global integrated financial

system and has an economy potentially more diverse than the other BRICs due to its raw

material and manufacturing potential. In terms of GDP per capita, Brazil ranks 65th,

Russia 59th, China 86th and India 118th. By comparison Korea currently ranks 36th,

Singapore 25th, and Hong Kong 27th.

Brazil's stock market, the Bovespa, has gone from approximately 8,700 in September

2002 to over 70,000 in May 2008. Government policies have favored investment

(lowering interest rates), retiring foreign debt and expanding growth, and a reformulation

of the tax system is being voted in the congress. The British author and researcher Mark

Kobayashi-Hillary is editing a new book titled 'Building a Future with BRICs' for

European publisher Springer Verlag that examines the growth of the BRICs region and

its effect on global sourcing. Contributors to the book include Nandan Nilekani, and Shiv

Nadar, with publication scheduled for October 2007

39

Findings:

India will become third largest economy in world after China & United States in

2050.

India will be in G-7 countries by 2027 about 10yr sooner than initially believed.

40

India and Brazil are demographically in a substantially more favourable position

than China and Russia... India, by contrast, will enjoy a very favourable

demographic momentum for another three decades.

BRICs – a 10% player in the global economy.

Total land area: 29%. Population: 43% of the world.Nominal GDP: 9%. Exports

10% share. Foreign direct investment 6%. Foreign reserves: 24% of the world.

Primary energy consumption among the BRICs rose 61.7% from 1985 to 2004,

while global primary energy consumption increased 42.1% (contribution by

BRICs: 33.2%). As a result, the percentage share of BRICs’ primary energy

consumption in the world rose from 22.7% in 1985 to 25.8% in 2004

CONCLUSION:

BRIC was introduced to the world by economic researcher, Goldman sachs in 2003, they

argued Brazil, Russia, India and China would become global economic powerhouses with

in a generation and be symbol of the migration of wealth and prosperity from the west to

the east. The BRICs share of world GDP rose from 16% in 2000 to 22% in 2008

collectively they did better than average in the subsequent global recession together they

account for 42% of world population and one third of global economy growth in the past

10yrs, putting aside the United States (ranked third in population), annual economic

growth in the other four most populous countries- China, India, Indonesia & Brazil was

above 5-6% 2008-09 The BRIC hold $2.8trillion or 42% of global foreign reserve.

BRICs & its relation with Indian economy growth defined by Goldman Sachs that after

the recent financial crisis that the combined GDP of the BRICs might exceed that of the

G-7 countries by 2027 about 10yr sooner than initially believed. Indian economy growing

faster with A growing population of young people and resultant changes in the savings

and investment pattern would be advantageous for the Indian economy going forward.

Brazil and India are demographically in a substantially more favourable position than

China and Russia... India, by contrast, will enjoy a very favourable demographic

momentum for another three decades. This will impact not only economic growth

41

prospects, but also savings and investment behaviour and potentially - if somewhat

difficult to quantify - financial market growth prospects," DB Research, a part of the

German banking major, Deutsche Bank, has said. Going by the United Nations, the

working-age population in India would shoot up by 240 million over the next two

decades, equivalent to four times the total population of the UK.

The demographic developments in the BRIC (Brazil,Russia, India and China) over the

next 10, 20, 30 years will vary greatly.

Indias grouping in BRIC includes two of the largest energy producers and two of the

largest consumers in the world and can cooperate in both upstream and downstream

areas, and in the development of new fuels and clean energy technologies.BRIC

countries have an important role to play in the shaping the pace, direction and

sustainability of global economic growth

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