India looking the most promising among BRIC nations: Jim O’Neill

There is obviously a huge unknown because of what happened with the tightening of policy particularly in terms of the residential real estate market and credit. But if I put it altogether and I look at the policies that the Chinese government have announced in the past week which are trying to support the consumer. I think by Spring I would be in the camp that things in China might at least cyclically positively surprise next year.

Indian economy went through a grinding lockdown for about three months but when it opened up there was a huge pent up demand and revenge shopping. The attitude towards spending at a consumer level has changed. If China opens in 2023 at some point in time and we are talking about over a billion people could that lead to a very big differentiated demand driven world in 2023? Will everything start zooming up and could it lead back to inflationary fears?
If China improves particularly driven by their own consumers, this is going to be a pretty positive thing for certainly a number of other economies particularly consumer exporting ones in Asia.

I am really focused on that but it is also true that it could mean increased Chinese demand for commodities including energy which would really depend on what style of improved consumer activity the Chinese undertake. If it is more to do with even faster use of internet based shopping and not necessarily a huge amount of more personal travel then it might not have the consequences on commodities.

Of course if the real estate remains under pressure then that would limit some of the demand for certain commodities that relate to house building. So I would not want to have too stronger view on that but you would think at the margin if China comes back stronger, certainly a big decline in commodity prices has been taking place in recent months will come to an end and that may be why central banks would be very cautious.

I will take the clock back and take it almost a decade back when you coined the acronym BRIC and frankly if you look at the progress of the BRIC nations which to your mind has been the strongest BRIC economy and which will be the strongest BRIC economy for next five years?
Well it is actually 21 years now when I first brought the acronym into the discussion and so if I look back it is very clear that China has easily become the most successful of them on relative and absolute terms as I have touched on already.
Today it is twice the size of all the other BRIC countries put together. India is doing pretty well of course but it has not done quite as well as its potential over that period but it is doing well enough to become the fifth largest economy in the world and of course Brazil and Russia have been a huge disappointment particularly in the second decade.

When I look forward to the next five years I think it is very hard for me to avoid the conclusion that India actually looks the most promising. What is really interesting since COVID is that India has come out of it seemingly reasonably well despite so many challenges to India’s education and health system and many other issues.

There are certain aspects of the Indian economy that superficially positively surprise me particularly how it has coped with this period of huge energy increases and how it appears to be increasingly embracing new technologies to fight climate change.

If you put all these things together with the enormous positive dynamics of its labour force I think in theory the next five years look pretty good for India and if I put it in the BRICs context as this decade unfolds India is in a position as we get towards the end of the decade being the third logistic country in the world. So it is quite exciting for India.

For China there are enormous challenges that we touched on but I do think there is a decent chance they will do better in the next two years than they have in the past two which in a way would be difficult. But I do worry that unless President Xi becomes more friendly to business and somehow we have an improvement between China and the rest of the world, China has probably passed the absolute best time of its growth performance and it might only grow or up by around 3% to 4% on average for this decade which would mean India would almost definitely grow by more than China.

I would like to just flag off one concern which is a very visible concern that if Indian economy has to go from three trillion to five and five to 10 the energy needs of the country are going to be huge. They are going to be large and as the per capita increases your energy consumption will also increase in the same proportion. India is still energy dependent whether it is gas or oil and solar and alternatives are still a distance away. Do you think this could be the biggest impediment for India?
If you look at what has happened with global activity and global energy usage and global gas prices despite the scale of the damage in the ongoing war in Ukraine, European gas prices have fallen by over half. They did reach the peak and there is growing evidence that many European countries have rather rapidly improved their what we call energy efficiency by essentially using less energy for the same amount of GDP growth.

It is obviously a huge concern that as India gets bigger and goes from three to five and five to 10 trillion its carbon footprint gets bigger but I would not dismiss the possibility that opposite is the case when this just ends up being enormously exciting period for the application of more efficient and a whole new set of alternative energy in India.

I am just going to shift gears and perhaps change the scope of the discussion and I will throw in more ingredients in the melting pot. How do you see the geopolitical situation evolving? I am not talking about the war but I am talking about the big blocks here whether it is NATO or what is happening to the Quad block, G-20. How do you see the big blocks now moving in 2023?
What I would just say at the onset is that again as this year finishes it is fascinating to observe how India itself has navigated this very-very challenging and complex geopolitical or positional issues.

In some ways India is leading by example as to how you navigate between these great big forces of China and the US and it seems to have done quite well. But these issues are not going to go away. Let me start by saying that the way China deals with this probable pick up in COVID infection itself might be relevant to how the next stage of this challenging global cooperative spirit develops.

What a really bold and clever thing for the Chinese to do would be actually to consider importing a large number of the best western vaccines which would send a very different message about how eager China wants to truly cooperate on global trade and would almost definitely force a more open minded approach and a more positive response from Washington and probably European capitals.

So if we have improvement in trade and investment between China and many other Asian countries that would boost Asian trade and world trade which will be absolutely spectacular.

We need some kind of a new initiative and some new way of thinking to break this rather tiresome and frustrating and somewhat boring sort of never ending standoff between the US and the G-7 countries. It is very clear that we live in a world where these important countries do not share the same cultural or political beliefs and we just got to get on with it and find a way of cooperating where we believe it is best interests rather than to have some kind of a battle as to which one is better because that is not going to be a situation in which anybody wins.

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