Will Indonesia Replace India in the BRICs

Discussion in 'Economy & Infrastructure' started by ajtr, May 17, 2012.

  1. ajtr

    ajtr Veteran Member Veteran Member

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    Will Indonesia Replace India in the BRICs
    Interesting article. India is clearly the laggard of the BRICs in so many regards. Eg Brazil can host the olympics and world cup best India can do is a watered down version of the commonwealth games.

    Ive been to both countries and I find Indonesia a lot more ahead to a general tourist in terms of infrastructure, cleanliness, transportation and corruption.


    As India fails to deliver on its promise of growth, a smaller Asian country Indonesia, finds itself in a position to lure investors away from the third largest economy in the region with higher stock market returns, better fiscal management and lower inflation.
    "Indonesia looks like it has hit the sweet spot, whereas India is nursing a headache from its latest boom," says Frederic Neumann, Co-Head of Asian Economic Research at HSBC.
    While the two economies aren't similar in terms of size, with India's population of 1.2 billion and Indonesia's at 240 million, the countries share many similarities, leading to comparisons. Both have a burgeoning consumer base and are democracies with an investment grade rating.

    India's economy has hit a rough spot with the slowest pace of growth in three years with the government unable to deliver on economic reforms. On the other hand, Indonesia has won favor with investors over the past few years.
    That's leading Neumann and others to call for Indonesia to be included in the lineup of top global emerging markets. "The term BRICs really misses out on some of the key developments of our time. Indonesia has solid public finances, strong growth, a burgeoning consumer market, and plenty of resources to keep the economy afloat for many years," says Neumann.
    On the other hand, India, according to Goldman Sachs' Jim O'Neill, the man who coined the term in 2001, is the BRIC that has disappointed. Late last year O'Neill said that India's poor record on productivity, foreign direct investment (FDI) and policy reform had made it the most disappointing among the four biggest developing economies - Brazil, Russia, India and China.
    For example, India's fiscal deficit target of 5.1 per cent is wider than those of its BRIC peers. Its forecast deficit is more than four times Brazil's estimated 2012 budget gap of 1.2 per cent of output.
    "It is difficult to see how India can turn around in the short term. It could in the next couple of years, but that is an eternity from investors' point of view, " says Neumann.
    He adds that investors have already voted with their feet taking money out of India. The latest evidence of this was in the month of April when offshore investors withdrew some USD 403 million out of Indian equities and bonds, according to Reuters data.
    While it is difficult to estimate how much of India's loss has been Indonesia's gain, market watchers say many investors have been increasingly looking at Indonesia as an alternative to India.
    "To a large extent investor interest has moved to Indonesia," Robert Prior-Wandesford, Director, Asian Economics at Credit Suisse told CNBC. "Indonesia's equity market is hugely better than that of India and in part at the cost of India."
    While the Bombay Stock Exchange's Sensex was the worst performing major global index in 2011 falling almost 25 per cent, the Jakarta Composite Index gained over three percent.
    Besides delivering better returns, Indonesia is also catching up with India when it comes to economic growth. India's gross domestic product (GDP) is expected to expand at just under 7 per cent in the current fiscal year, which began April 1, while Indonesia is expected to deliver 6 to 7 per cent growth over the next couple of years, say analysts.
    Even on trade, Indonesia scores over India. According to brokerage CLSA's latest forecast Indonesia's current account deficit in 2012 will be just 0.8 per cent of GDP, while India's will come in at around 3.9 per cent.
    Rajeev Malik, Senior Economist at CLSA, says in Indonesia's case, net Foreign Direct Investment (FDI) will offset the current account deficit. In India's case, he points out, an estimated net FDI inflow of USD 15-20 billion will be well short of the current account deficit.
    "They are doing better although they are not as big an economy as India," he says.
    Credit Suisse's Wandesford says Indonesia reminds him of India three to four years ago, when there was a huge euphoria over the growth opportunity it offered foreign investors and companies. "In 2005-2008 India could do no wrong, now it is Indonesia."
    India, which was awarded an investment grade rating by Standard and Poor's in 2007 is now under threat of losing it, with the ratings agency last month downgrading its credit outlook to negative. By contrast, both Fitch and Moody's upgraded Indonesia to investment grade in December and January, respectively.
    Size matters
    But despite the growing pessimism around India, most experts feel that it is not time yet to write off a country of a billion-plus people, if on nothing else than its sheer size.
    Some argue that while there is a case for Indonesia to join the BRICs, it shouldn't be at the cost of India as they both have different comparative advantages. While one is a commodity economy, the other is a services oriented one and an investor, for example, can't completely replicate his menu of Indian stocks in Indonesia, say analysts.
    "BRIC investors have a 20-year horizon and India will finally deliver in the long term," says Neumann.
     
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  3. nrj

    nrj Stars and Ambassadors Stars and Ambassadors

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    Sums up the topic :thumb:
     
  4. Mad Indian

    Mad Indian Proud Bigot Veteran Member Senior Member

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    Now I know why Ajtr is called by many as troll:cool2:
     
  5. drkrn

    drkrn Senior Member Senior Member

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    will Cambodia replace China in brics
     
  6. Mad Indian

    Mad Indian Proud Bigot Veteran Member Senior Member

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    India Is the laggard of the BRICs-:rotflmao:

    For 2011-2012, Indian GDP grew by ~7% while Russian Gdp and Brazilian GDP was approx. 3% growth.

    Shows how well the article has been written:D
     
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  7. agentperry

    agentperry Senior Member Senior Member

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    well bric is conglomerate of nations having high growth rate with potential of becoming world power(keeping in mind their sheer size and huge population and resource base).

    though indonesia is doing good and i wont argue on that. Indian exit from bric is far cry because the other two members of the group-russia and brazil dont have that big industrial base( now russia and not soviet russia) and they are having high growth by the virtue of resource exports.
    russia have oil and gas to boost its economy and brazil has huge landmass and agricultural products to feed the worlds' industry's demand.

    india on the other hand is service champ and china is well known as factory of the world.

    India is surely lagging on many fronts if we talk about the relative performance of bric nations. but mostly its the income distribution case. per capita income is lowest among the brics or bric wateva you may consider.
    there is policy paralysis but now i would like to inform you that by the direct intervention of PMO a new mechanism called spv is place to fast track projects and makes investment in India hassle free. for eg setting up a power plant in india requires 58 clearances from various ministries and depts but because of this spv the clearnace will already be given to investors, just at the time they pledge their investment.

    remittance is what india and pakistan can be compared on, and this is again very high in india's case.

    indonesia is growing and its huge size is helping it to get global recognition but it outsmarting india is remote case.

    the basic lacking is the absence of research institutes and this will ail it for atleast a decade to come.

    rest bric has space to accomodate indonesia.

    and moreover you can put some attention on non muslim nations also like vietnam who are showing promising and exciting growth
     
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  8. asianobserve

    asianobserve Elite Member Elite Member

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    You can't argue with an economy with 1.21 billion English speaking/literate population...
     
  9. Yusuf

    Yusuf GUARDIAN Administrator

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    Yeah dump BRICS.

    US is now trying to set up USIC.
     
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  10. panduranghari

    panduranghari Senior Member Senior Member

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    Written by HSBC. You should not be surprised.
     
  11. Yusuf

    Yusuf GUARDIAN Administrator

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  12. civfanatic

    civfanatic Retired Moderator

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    As a state, Indonesia is even more corrupt and dysfunctional than India.
     
  13. Yusuf

    Yusuf GUARDIAN Administrator

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    New BRICS, Bakistan, Ruanda, Indonesia, China, Somalia.
     
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  14. Mad Indian

    Mad Indian Proud Bigot Veteran Member Senior Member

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    Why Sir? Does HSBC have anything to do with it ?
     
  15. pack leader

    pack leader Defence Professionals Defence Professionals

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    HSBC is British Chinese joint venture bank hate for India is a given
     
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  16. panduranghari

    panduranghari Senior Member Senior Member

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    It's not Chinese . It was Pivotal in channeling money from opium wars from china via hong long to London. Actually HSBC has been good for India vis-a-via china on colonial era. They encouraged tea plantation, have Tata the loans for factories. On the other hand HSBC looted and pillaged china.
     
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  17. roma

    roma NRI in Europe Senior Member

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    besides that they do not have any indigenous industrial base , no innovation nor invention - just simply cheap labour
     
  18. Tianshan

    Tianshan Regular Member

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    all developing countries are "cheap labor" compared to the developed world.

    and it was fareed zakira who first came up with the idea that indonesia should replace india in the brics.

    and it was jim o'neil who said that india was the most disappointing of the brics.

    so there go all your conspiracies on this thread.
     
  19. LalTopi

    LalTopi Regular Member

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    5 year movements of funds Fidelity Indonesia versus Jupiter India:

    Chart | Interactive Investor

    Hopefully the above chart will be visible.

    Basically the news is old news. The time to have moved out of India and into Indonesia was at the beginning of 2011. The Indonesian stock market has been highly resilient to the world weakness in stock values - mainly due to the strength of oil. But as you can see there has been recent weakness in the Indonesian stock - probably as oil has peaked. I would not rush into Indonesia at the moment, in fact it is far better to watch for recovery in India and China.

    The analysts can argue that in the long run Indonesia might outperform India, but as John Maynard Keynes said 'In the long run, we are all dead'.
     
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  20. LalTopi

    LalTopi Regular Member

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    Indonesia fund versus (HSBC) China fund. Again huge weakness in China versus Indonesia.

    Chart | Interactive Investor




    Indonesia versus (Neptune) Russia. Surprisingly Russia has been weak even though it has oil. This has been due to all the political problems in Russia.

    Chart | Interactive Investor




    In summary, Indonesia has been very strong over the past 18 months. But over all the other BRIC nations, not just India. However, there is no guarantee this will continue,
     
  21. amoy

    amoy Senior Member Senior Member

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    Indonesia seems more promising than the S of BRICS i.e. South Africa, while S.A. is added into BRICS in part due to it being African
     

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