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Why India cannot be replaced with Indonesia in the BRIC?


Why India cannot be replaced with Indonesia in the BRIC?
In times of cynicism and over exuberance to report, all kind of theories abound, never mind if some of them could have serious judgmental errors.

The economic bedlam of the last few days and the fall in the Indian rupee has given rise to a new theory that is floating around, “Will Indonesia replace India in the BRIC?”


Now BRIC is not a formal bloc, but just a term coined for Brazil, Russia, India and China. What in effect the articles go on to mean is that would India be ignored for Indonesia by investors, particularly foreign investors.

Now, the Indian economy is suffering from inertia alright, but, the elephant can dance. It has in the past and it will in the future. Now, for the naysayers and doubters.

Just a few days back, there were reports that India would emerge as Facebook's largest market, overtaking US as early as 2015. Now, what would happen if Facebook decided to ignore India today for Indonesia. It would lose its largest market in three years from now – a colossal loss indeed.

Earlier this month officials of Reckitt Benckiser (world's largest producer of household cleaning products) with brands like Dettol and Strepsils said it expects the Indian operations to become its biggest market globally in terms of revenue in the next 3-5 years. If India can contribute the largest revenue to a MNC behemoth like Reckitt, which has operations in 200 countries, that is fantastic indeed.

Last month LinkedIn said India had become its second largest market ahead of China. Similar comments have been echoed by Starwood and the US Exim Bank, which claim that India would be their largest markets in the next few years.


Indian stock commands a price to earnings multiple that is the highest amongst emerging and developed economies. The Sensex companies P/E mutiples, trade at a premium to developed economies. Why do investors pay a premium to own Indian stocks? It's simply because they bet on growth and are willing to pay a premium for the growth.

Foreign Direct Investment in Indonesia totalled, $19.3 billion in 2011. In FY 2011-12, FDI in India increased by 46.4 percent to $ 28.4 billion. One report says that India and China together attract 63% of the emerging market private equity.

Now, there are a series of comparisons that make India a better bet for foreigners, but let's take one last and the most important one – India's young population.

Sam Pitroda was recently quoted by IANS saying,"India's 238 million 15 to 24 year-olds equals the total population of the world's fourth most populous country, Indonesia." India's young population will increase by 136 million by 2020, as against 23 million anticipated for China.

That's going to be a huge working population in the next 10 years, with a market size that is gargantuan.

Foreigners can decide to ignore India due to short term concerns, but, may well lament their folly for not taking a longer term view. As for the reports on Indonesia replacing India in the BRIC, it may just be a case of "putting not a foot, but feet in the mouth".

Read more about: bse bric
Story first published: Friday, May 18, 2012, 12:09 [IST]
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