Why BRICS economies are the future of the World!
Came across some dire predictions for the Americans in the following article:
The author claims that ALL Americans are likely to get an effective erosion of at least 50% in their real purchasing power in 2012. I'm not so sure about the timing, but the event appears quite likely.
And the reason is that USA, as well as the majority of the European Nations are likely to have to face their reality sooner than later - The reality of very low GDP Growth.
Likewise, the BRICS countries (Brazil, Russia, India, China & South Africa) are equally likely to enjoy a fairly significant boom period in the next decade and beyond.
Chances are bright that we'll have a two-paced growth around the world. Most of the so-called developed countries of today (primarily Europe & USA) will face huge challenges in even maintaining a very low GDP growth of 2-3% per annum. And the BRICS countries are likely to set a scorching pace of GDP growth of 8-10% per annum for several years - certainly at least till 2020.
The reasons for my above prediction is not very difficult to guess.
Over the past several decades, the presently "developed" countries have become highly consumerist societies. Consumption levels across a wide range of products have gone up manifold. The so-called "social welfare" schemes have ensured that much of the "Developed World" is now populated with an ever-aging population which, unfortunately, is suffering from some strategic disadvantages:
- Thanks to a strong "Welfare State", laziness levels have increased in most of the "Developed World"
- Thanks to ever-increasing consumerism, a very significant majority of the population already have all the goodies in life - Chances are very bright that in the coming decade and beyond, the "Developed World" is far less likely to consume virtually any incremental quanities of consumer durables or FMCG goods in comparison to the BRICS nations.
Take a look at the following statistics as an example:
Country-wise No. of Automobiles per 1000 population (without including Two-wheelers) Germany 534 Greece 451 Iceland 724 Ireland 542 Italy 690 Portugal 509 Spain 608 United Kingdom 525 United States 828 Brazil 249 China 37 India 15 Russia 263 South Africa 159
Interestingly, Automobile penetration is very widely considered to be one of the most reliable and critical measures for identifying the current "developmental status" of a nation.
- Thanks to their financial success of the past, most of the major "Developed World" currencies are extremely strong vis-a-vis currencies of the BRICS nations - Hence, exports from BRICS are far more competitive AND exports from "Developed World" are increasingly uncompetitive.
- Thanks to the "easy life" that they've been used to for the past few decades, the "Developed World" children have not being showing the urge to excel in education, especially in comparison to those from China & India.
Hence, irrespective of the kind of challenges faced by the BRICS nations, those of us fortunate enough to be living here can confidently say:
We are the World!
Moral of the story for the majority of my readers based in India: Don't get conned by your financial advisors who ask you to go in for geographical diversification by investing in, for instance, US companies - Chances are bright that the returns you'll get here will be huge in comparison.