India Emerging as Best Trade Bet among BRICs for 2012?

Though a group of four, the bulk of the attention from U.S. businesses aimed at members of the BRIC nations (Brazil, Russia, India, China) has been focused mostly on China and Brazil. However, with potential problems growing within the economies of at least two of its counterparts, India appears to be emerging as a perhaps the key target for new exporting and joint venture opportunities over the next two years.

This month, Export-Import Bank Chairman/President Fred Hochberg has been telling business media outlets that India has potential to be Ex-Im's largest portfolio over the next 12 to 18 months. Hochberg has been to India multiple times this year as part of the Obama administration's traveling delegations. Perhaps it's with good cause since Ex-Im's portfolio in India already exceeds $5 billion.

The 2011 Coface Handbook of Country Risk noted India has seen economic growth ranging between 6.7% and about 8.8% over the last three years and has substantive strength in areas such as technology. The rise in wages for skilled workers also is expected to boost consumer culture, a plus for domestic exporters reeling from lowered expectations in Europe and China, though some international economists fret about the nation since much of its population "still lives off a dollar per day." However, India appears to be continuing to emerge and grow, which could be a problem for its BRIC partners in China and Brazil.

Chinese growth has been red hot in recent years (9.6%, 9.1%, 10.3%), with little cool-off expected in 2011. However, weaknesses are creeping in, most notably fast-rising inflation and what appears to be an erosion in the trade advantage it has over other nations. Other issues worth monitoring include increasing social tensions linked to growing inequity, overcapacity in industry and commerce, uncertainty and weakness in the banking system and escalating environmental problems. It's by no means a short list.

Meanwhile, Brazil faces asset bubble formations that are not too dissimilar from those of the United States in the last decade as well as inflation, and the nation has a reputation for shooting itself in the foot every time it appears ready to become a true economic player. As for Russia, to say the country is rife with corruption would be a massive understatement. Additionally, its economy has little diversity beyond its raw-materials stronghold and the middle class there is few and far between.

That's not to say India doesn't have its own problems, including corruption and somewhat weak banking. However, NACM Economist Chris Kuehl, PhD notes the nation seems to be working on that, and reformers are pressing hard to speed up efforts.

"The growth of the Indian economy has been spectacular and second only to that in China as far as economic miracles are concerned," said Kuehl. "The most consistent inhibitor to faster growth has been the corrupt environment in the nation. It has long been a problem created by the wealth of bureaucratic rules and regulations. The protests building in recent weeks will not change this system overnight, but there are some very powerful political forces getting behind the effort, as the populace is responding. Enterprising politicians can ride this outrage to power. The ruling party is having a hard time keeping ahead of this."

Brian Shappell, NACM staff writer