INDIA AND THE BRICS

SHOULD INDIA STOP PAYING ATTENTION TO THE BRICS GROUP, A SINKING SHIP?

The Economic Times, April 22, 2012

India has just a 50% chance of becoming a breakout nation (exceeding expectations of 7% GDP growth) in coming years. So says Morgan Stanley honcho Ruchir Sharma in a fascinating new book, Breakout Nations.

There is no better book for country-by-country accounts of emerging markets (and riskier ones called frontier markets). Its strong point is the author's reliance on grassroots experience in each country, avoiding statistical charts.

His surprise prediction: the top breakout prospects include two Muslim democracies, Turkey and Indonesia. Tops in Europe are Poland and the Czech Republic. Asia's potential breakouts include Sri Lanka and the Philippines. Nigeria and East African nations may qualify too.

India's big advantage, says Sharma, is its low income base and big catch-up possibilities. He correctly sees huge potential in the sharply accelerating backward states of north and central India. These can grow fast for decades with little effort through catch-up with advanced states. They are being transformed by dynamic chief ministers, even as New Delhi dithers and wallows in corruption , premature welfarism and policy paralysis.

The book is a bit too pessimistic about India, which probably has more than a 50% chance of exceeding 7% growth. Sharma dismisses the demographic dividend, arising from a growing workforce, as a mere fad. But research shows that demographic dividends accelerated growth in every Asian tiger from Korea to China. India is no exception.

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