At a time when the entire globe is facing the economic slowdown, it is the emerging economies that are being looked as a big hope. In fact, it is said that the Bric countries are likely to recover first from the current global meltdown. To elaborate it, these developing nations are being looked as the solution for the global financial turmoil.
It is not that the Bric countries are immune to the present financial crisis. Directly or indirectly, their economic growth has been impacted by the developments. Still, they are likely to recover first from the problem. P Chidambaram, finance minister, government of India, had recently said that emerging market economies are relatively safer. However, he was quick to add that growth of these countries will nevertheless be affected and would slow to 6.9% in 2008 and again to 6.1% in 2009.
While the Russian government was likely to inject $36 billion into the banking system of the country in its bid to restart corporate lending, Chinese government has already announced a stimulus package worth $586 billion early this month. On the similar lines, demand is on the rise for the announcement of a stimulus package in India too. In connection with Russia, while 500 billion roubles will go to Sberbank, nearly 200 billion roubles go to VTB, 25 billion roubles to Rosselkhozbank and finally upto 225 billion roubles to the remaining banks, said the Russian president, Dmitoy Medvedev.
As regards India, the impact is visible with the country?s economy slowing down. Nevertheless the experts are of the view that despite the projected slowdown in the country?s GDP growth, India was set to witness a remarkable GDP growth when compared to the developed countries. According to a study by World Economic Outlook, India was likely to register GDP growth of 7.9% in 2008-09 which may slip to 6.9% in 2009-10. Similar is the case with the Chinese economy. A media report says that Chinese economy was expected to slow down to around 8-9%. Still, this pace is being seen as a good show. Now the thing to be observed was the fact that in the current scenario, the dragon economy may shift its base to export-oriented country to domestic consumption-based one. Again, if it happens, the country was likely to be benefited out of it by turning its growth sustainable.
Hemant S Amrute, director, Brazil-India, a business and trading consortium focused on the emerging multinational markets, says, ?The maximum number of billionaires in the world are currently in Moscow. They themselves have good mines there which have good reserves.? Finally, the policy of these developing countries has secured them against a severe backlash, said Amrute. According to Vijay Kelkar, chairman of the thirteenth Finance Commission, ?The world economy, reeling under the financial crisis, could now rely on India, China and Russia for giving a boost to sagging demand.? The trio could play a significant role in the global economy, which is facing a slowdown, Kelkar said at a conference on Russia, India and China in New Delhi recently. He said Russia, India and China have potential both in terms of production and intellectual capabilities. ?Russia, India and China can play an important role as support system for the global economy. On the supply side, all three have enormous production potential… To realise the potential, we should take massive amount of reform,? he said.
Another important reason why emerging economies like China are being looked with hope the world over is the fact that they are flush with funds and are ready to invest in those countries that are faced with the global meltdown. Look at the numbers. Chinese companies invested $34 billion overseas in the first half of 2008, including $26 billion in non-financial institutions, which shows an increase of 229% over the same period a year ago. Not to mention that most of Chinese investment overseas until now have been related to banking and oil fields only. An agency report says that while China?s largest offshore oil-services provider, China Oilfields Services, had announced in August that it was buying Norway?s Awilco Offshore in a deal valued at $2.5 billion, the Industrial & Commercial Bank of China finalised $5 billion purchase of a 20% stake in South Africa?s Standard Bank. What about the fact that India, Brazil, China and India, along with few other emerging economies comprise nearly one-third of the global economy.
However, the experts in India are in strong favour of announcement of a stimulus package on the lines of China and Russia. They feel that India is in urgent need of fiscal stimulus in order to arrest the current economic slowdown and sustain the growth momentum. While there has been good measure of intervention from the Reserve Bank of India to improve liquidity, the government has so far offered little to ease the economic crisis. Indian economy is not de-linked from the world economy and the malady seems to spread from the financial sector to the mainstream economy. India and China are not decoupled but are on a firm footing. China has announced a fiscal package of $587 billion while India will spend as much as $500 billion in infrastructure development till 2012. Thus, both these major Asian economies are well on their way to economic consolidation. However, this is the time for speedy action. India can soon look up to 9-10% growth, Minoo Shroff, eminent economist, opined, indicating real optimism on this count.