Please knock India off the BRIC list - The Honest Truth By Ajit Dayal
Investing in India - Honest Truth by Ajit Dayal
Please knock India off the BRIC list A  A  A
12 JUNE 2013

Over the past year, Jim O'Neil, currently the Chairman of Goldman, Sachs Asset Management has been brooding over the fact that India may no longer deserve to be in the magical BRIC list that he - in his research days at Goldman - helped create. This famous acronym was supposed to stand for the magical future economies represented by Brazil, Russia, India, and China. There have been suggestions that Indonesia should replace India as the "I" in BRIC.

Graph 1: Indian stock markets perform a little better than Emerging Markets,
(in USD, from Jan 1, 2005 to May 31, 2013)
Source: Bloomberg

My prayer to the wide-eyed authors at Goldman who mastered the art of taking an xl sheet and drag it all the way to the extreme right: please knock India off your BRIC list. You will do us all a huge favour.

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My prayers are based on:

  1. After a presentation by some members of the BRIC team during a visit to Bombay in 2005, I asked them how the youth (the key to their demographic dividend stuff they were belching out) would get jobs. And their response was: "we assumed the government would put in place policies to create jobs". I have written about this simplistic assumption before and am always amazed at the power of an xl sheet over reality.

  2. The publication of the BRIC report was nothing short of a Bollywood blockbuster: an escape from reality. If that report was prepared by Equitymaster, it may have been burnt by the critics. Having come from a "gora" house and from those who "do God's work", the BRIC report was perceived to be Holy Book. Fed up with dealing with the real issues of solving India's many problems our Prime Minister, Finance Ministers, the Deputy Chairman of the Planning Commission and various other assorted members of the government - not to forget India's crony capitalists - all began basking in the glory of some fictitious piece of dreaming that was mistaken for analysis. Expecting Jim O'Neil to be the Badshah Khan who will rescue the country, they all shut off their common sense and began appearing on TV shows projecting India as a super power. All policy making was suspended - only deals with crony capitalists for coal, iron ore, SEZ, and spectrum were concluded. Those would, after all, leapfrog India into the Super Power league. What a sorry sight that was!
Over the past two years, that superpower status of all the BRICs has been deflated with varying degrees.

But India has taken it on the chin.

Finance Minister Chidambaram, in his second innings, has a lot of challenges. Firstly, rather than being a 5-year term, this second stint as Finance Minister may be a T-20 limited overs match.

While speeches and quick fixes may have won him some momentum and market accolades, the honeymoon period is over.

Graph 2: The Chidambaram cheerleaders are tired
Source: Bloomberg

And when Mr. O'Neil dumps India from his BRIC list, all those who swooned on TV channels about the Indian century better wake up to the smell of reality. For while they were lost in the Bollywood dream, the India they were supposed to look after slipped further into disarray.

So, wake up and start doing the hard work. The Bollywood movie is over.

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Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is a Director at Quantum Advisors Pvt. Ltd and Quantum Asset Management Company Pvt. Ltd. The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and has not been authenticated by any statutory authority. The author, Equitymaster, Quantum AMC and Quantum Advisors do not claim it to be accurate nor accept any responsibility for the same. Please read the detailed Terms of Use of the web site. To write to Ajit, please click here.

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2 Responses to "Please knock India off the BRIC list"


Jun 15, 2013

I heard you speak about this three years back in Vancouver. I was impressed that you had the courage to speak about the lack of jobs in India when it was almost sacrilegious to say anything against India's future growth. You have indeed been more than correct in what you said.

Like (5)

haren Khatau

Jun 12, 2013

Yes Goel Sir, I believe in your statement to knock india off the bric list, but then most big cars , luxury trips and big designer labels seem to sell in india. Weak currency , but the money spent by indians seem to be on a high in the above goods. The indians seem to forget about bieng economical, and look expensive in habits nowadays, that is intriguing me

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