Bric economies are going through what is, in effect, an economic time warp?a never-before experience. Too much of a good thing, really. Accustomed, as in India?s case to the imposition of import denial measures like exchange controls, they have always treated OECD markets as cornucopias of demand for exports.

But the Bric countries are clearly out of the loop this time. Unable to eye OECD markets, all that they get is approbation from multilateral banks or development agencies for energising indigenous (regional) sources of effective demand. But, have they succeeded in stoking domestic demand?and, if so, then to what extent? The simple answer to that is, no two Brics are similar. There is also a high chance that they will re-emerge as very different set-ups once the recession lifts.

Finally, one vital aspect that is unlikely to change is that neither the Bric, nor any other emerging economy, willingly indulges in subventions or handouts to create domestic demand. Their governing elites would much rather load the general populace with temporary hardships and production cut-backs than create demand within.

That, then, is the fundamental difference of today?s new policy from the older one of demand-creation. Downsizing for lower costs (or greater efficiency) wins out over pump-priming. Brazil seems to be the sole exception to the rule.

Brazil

On October 31, there was a news report that mining giant Vale?s fears that iron prices would weaken further. Vale had been proposing to downsize output by 10%?in line with lower world steel demand. That would mean outputting 30 million tonne less annually.

That put Vale in the illustrious company of BHP Billiton and Rio Tinto?both of whom have also taken to restricting output despite some recent big investments. Vale insists that its world peers too are serious about cutting production?the amounts being taken off the markets thus being 20% of 2007 world steel output. That much might be commonplace, but what is so different is that the economy has been reliant on stronger consumer spending, flexible exchange rates, and higher reserves. Those should help the economy to ride out the global financial storm much better than others.

Observers say that credit crisis came just in time to cool off Brazil?s economy. Inflation rose to 6% due to strong consumer spending. And, while slower global growth could help in moderating this, it would also permit the central bank to loosen monetary policy later on in the year. Such feather-touch controls help maintain growth: so, although a slowdown is forecast for next year?3.5%, compared to 2008?s 5.4%?that is exemplary when held against the expectation of 1% global growth in 2009.

Finally, and most atypically, Brazilian incomes have been rising?and inequalities declining. Wal-Mart has even declared its intent to invest $1.1billion in 2009, in 90 new stores. Those would be over and above the 330 it already operates there.

China

Matters are rather different there. Growth may be higher (nearer 10% per annum), but the economy is caught between a rock and a hard place.

Export demand is lower, the financial turmoil having queered OECD markets. And, without the oxygen of export demand, China is decelerating faster than anticipated.

Even attempts at domestic reflation have come to nought. That was plain from the fallout of a countercyclical, July-end, cut in interest rates. That 0.27% cut in the central bank rate, instead of boosting the economy, triggered a collapse in stocks.

A second such instance is China?s auto sector. Sales slumped in October, while the economy slowed. So, although 5.1 million passenger cars were sold in the year to September, at 12.48%, even that was lower than last year?s number. No wonder China has decided to roll back its steel sector until demand picks up again.

Even the external suppliers of iron ore have factored in this. Thus, a recent note from ANZ to Australian iron mining firms has even warned Australian iron ore firms like BHP, Rio and others to be prepared for a 20 million-tonne (15%) fall-off in sales vis-a-vis China. That was triggered by news that four of China?s state-owned steel companies (Shougang, Hebei, Anyan and Shandong) would be slashing output by 10%-20% until 2008-end.

Still, China is mostly seen as a long-term player, and there are no signs of collapse in raw material-intensive economic growth. Merrill Lynch analyst Vicky Binns asserts that China?s ?eight-year-old industrialisation and urbanisation process is not going to suddenly stop now.?

India

What (one might ask) would pump-priming achieve for India, the world?s second fastest growing economy after China? Not much, many would say?since the economy has already started from a low base, possesses a consumer class that is as eager as it is young, and where most official spending ends up by boosting demand.

Then again, we are also more globally integrated than we realise. The value of real estate is falling, mortgage rates are rising, and consumers are abstaining. That is very like the deflationary milieu gripping the US.

Indeed, there are similarities even with China. The Reserve Bank went so far as to lower the cash-reserve ratio (CRR) for banks to inject liquidity into the system. The fallout of that: a sharp decline in the market value of ETFs!

Other recent examples of such spending include financial sacrifices or outlays like loan waivers, subsidies on ?essentials? like petroleum products, foodgrain, higher education, periodic pay hikes for government employees and similar. The only difficulty still is the absence of competition and market discipline?meaning, much of the augmented consumption (or investment) spending gets siphoned away as rents for suppliers. Take, for instance, the Budget for the current fiscal; it proposes an 18% increase in outlays, on top of last year?s whopping 24% rise. That puts the consolidated budget deficit at 7% of GDP?an amount that would be higher still during GDP shrinking recessions.

Normally, inflation would be expected, and there would be no certainty that the extra outlays would link up with higher demand for domestic goods or services. In short, the system?s worst feature is the totality if the disjunct between official expenditure and intended beneficiary: rather like pump priming with a faulty check-valve.

The problem with India is not that there is no demand, nor that funds are unavailable. Faulty targeting is to blame.

Russia

Russia is concerned since the price of crude has been falling and there are glut-like conditions in other minerals. October 10 had in fact seen the sharpest fall in oil prices in four years?and reports speak of Russia going into a tailspin if oil drops to $50 billion?the lower end of a recent Merrill Lynch forecast. Clearly, therefore, Moscow must re-think its support policies should anything like that occur.

It had been feeding off the crude bonanza until of late, putting spending into overdrive. No wonder Russia-watchers on Wall Street warn of a hard landing should oil remain below $90 billion.

Yet, Russia?s case is very different from any of the others cited till now. There is demand, and to spare, but only in a limited number of pockets.

In the most recently reported case of Oleg Deripaska for instance, this long-time Putin confidant is revealed as having been a recipient of a rule-busting $4.5 billion bailout package from Russia?s ?Development Bank?. Not only is Putin the bank?s chairman, Deripaska?s name has also been linked to others (Lord Mandelson and shadow chancellor George Osborne.)

Another Russian billionaire, Alexander Lebedev, has even said that it was wrong for the government to bail out the country?s richest businessmen. It remains to be seen whether analysts were right when they forecast that the Kremlin would most likely end up by annexing several of Deripaska?s stakes in the biggest assets redistribution case since Yukos. It is clear that demand reflation is neither a fail-safe procedure, nor without favourites.