A REPORT ON THE BRICS COUNTRIES

ECONOMIC POLICIES

Submitted to Submitted by
Prof. Padmakali Banerjee BA ECONOMICS HONS (4th sem)

Contents 1. Introduction to BRICs

2. Brazil

3. Russia

4. India

5. China

BRICS • In economics, BRIC is a grouping acronym that refers to the countries of Brazil, Russia, India and China which are all deemed to be at a similar stage of newly advanced economic development. • The acronym was coined by Jim O'Neill in a 2001 paper entitled "Building Better Global Economic BRICs" • It is typically rendered as "the BRICs" or "the BRIC countries" or "the BRIC economies" or alternatively as the "Big Four". • It has been replaced by BRICS since the 2010 inclusion of South Africa in the bloc. • In 2010, however, while the four BRIC countries accounted for over a quarter of the world's land area and more than 40% of the world's population. • Projections on the future power of the BRIC economies vary widely. Some sources suggest that they might overtake the G7 economies by 2027. • According to a paper published in 2005, Mexico and South Korea were the only other countries comparable to the BRICs, but their economies were excluded initially because they were considered already more developed, as they were already members of the OECD.

Current leader Brazil - Dilma Rousseff, President China - Xi Jinping, President India - Manmohan Singh, Prime Minister `Russia - Vladimir Putin, President

BRAZIL
Brazil has the sixth largest economy by nominal GDP in the world, and seventh largest by purchasing power parity. The Brazilian economy is characterized by moderately free markets and an inward-oriented economy.
Brazil’s economy is the largest of the Latin American nations and the second largest in the western hemisphere. Brazil is one of the fastest-growing major economies in the world with an average annual GDP growth rate of over 5 percent. In future decades, Brazil is expected to become one of the five largest economies in the world.
According to the World Economic Forum, Brazil was the top country in upward evolution of competitiveness in 2009, gaining eight positions among other countries, overcoming Russia for the first time, and partially closing the competitiveness gap with India and China among the BRIC economies. Important steps taken since the 1990s toward fiscal sustainability, as well as measures taken to liberalize and open the economy, have significantly boosted the country’s competitiveness fundamentals, providing a better environment for private-sector development.
In 2011 Forbes ranked Brazil as having the 8th largest number of billionaires in the world, a number much larger than what is found in other Latin American countries, and even ahead of Japan. Brazil is a member of diverse economic organizations, such as Mercosur, Unasul, G8+5, G20, WTO, and the Cairns Group.

History

When the Portuguese explorers arrived in the 15th century, the native tribes of current-day Brazil, totalling about 2.5 million people, had lived virtually unchanged since the Stone Age. From Portugal's colonization of Brazil (1500-1822) until the late 1930s, the market elements of the Brazilian economy relied on the production of primary products for exports. Within the Portuguese Empire, Brazil was a colony subjected to an imperial mercantile policy, which had three main large-scale economic production cycles - sugar, gold and, from the early 19th century on, coffee. The economy of Brazil was heavily dependent on African enslaved labour until the late 19th century (about 3 million imported African enslaved individuals in total). In that period Brazil was also the colony with the largest amount of European settlers (most of them being ethnic Portuguese, but also Dutch and some Azoreans, Madeirans, Spaniards, English, French, Germans, Flemish, Danish, Scottish refugees and sephardic Jews). Since then, Brazil experienced a period of strong economic and demographic growth accompanied by mass immigration from Europe (mainly from Portugal, Italy, the Azores, Spain, Germany, Poland, Ukraine, Switzerland, Madeira, Austria and Russia. But also from the Netherlands, France, Finland, Iceland and the Scandinavian countries, Lithuania, Belgium, Bulgaria, Hungary, Greece, Latvia, England, Ireland, Scotland, Croatia, Czech Republic, Malta, Macedonia and Luxembourg), the Middle East (mainly from Lebanon, Syria and Armenia), Japan, smaller amounts from the United States and some Afrikaners from South Africa) until the 1930s. In the New World, the United States, Argentina, Brazil, Canada, Australia, Uruguay, New Zealand, Chile, Mexico, Cuba, Venezuela, Paraguay, Puerto Rico and Peru (in descending order) were the countries that received most immigrants. In Brazil's case, statistics show that 4.5 million people emigrated to the country between 1882 and 1934.
Currently, with a population of over 190 million and abundant natural resources, Brazil is one of the ten largest markets in the world, producing tens of millions of tons of steel, 26 million tons of cement, 3.5 million television sets, and 3 million refrigerators. In addition, about 70 million cubic meters of petroleum were being processed annually into fuels, lubricants, propane gas, and a wide range of hundred petrochemicals. Furthermore, Brazil has at least 161,500 kilometers of paved roads and more than 93 Gigawatts of installed electric power capacity.
Its real per capita GDP has surpassed US$ 10,500 in 2008, due to the strong and continued appreciation of the real for the first time this decade. Its industrial sector accounts for three fifths of the Latin American economy's industrial production. The country’s scientific and technological development is argued to be attractive to foreign direct investment, which has averaged US$ 30 billion per year the last years, compared to only US$ 2 billion per year last decade, thus showing a remarkable growth. The agricultural sector, locally called the agronegócio (agrobusiness), has also been remarkably dynamic: for two decades this sector has kept Brazil amongst the most highly productive countries in areas related to the rural sector.The agricultural sector and the mining sector also supported trade surpluses which allowed for massive currency gains (rebound) and external debt paydown. Due to downturn in Western economies Brazil found itself in 2010 trying to halt the appreciation of the real.
Data from the Asian Development Bank and the Tax Justice Network show the untaxed "shadow" economy of GDP for Brazil is 39%.

Components

The service sector is the largest component of GDP at 67.0 percent, followed by the industrial sector at 27.5 percent. Agriculture represents 5.5 percent of GDP (2011). Brazilian labor force is estimated at 100.77 million of which 10 percent is occupied in agriculture, 19 percent in the industry sector and 71 percent in the service sector.

AGRICULTURE
| |Coffee, soybeans, |
|Main products |wheat, rice, corn, |
| |sugarcane, cocoa, |
| |citrus, beef |
|Agriculture growth |9.2% (2008) |
|rate | |
|Labor force |15% of total labor |
| |force |
|GDP of sector |3.5% of total GDP |

A performance that puts agribusiness in a position of distinction in terms of Brazil’s trade balance, in spite of trade barriers and subsidizing policies adopted by the developed countries.
In the space of fifty five years (1950 to 2005), the population of Brazil grew from 51 million to approximately 187 million inhabitants, an increase of over 2 percent per year. In order to meet this demand, it was necessary to take the development of cattle and crop raising activities a step further. Since then, an authentic green revolution has taken place, allowing the country to create and expand a complex agribusiness sector. However, some of this is at the expense of the environment, including the Amazon.
The importance given to the rural producer takes place in the shape of the agricultural and cattle-raising plan and through another specific program geared towards family agriculture (Pronaf), which guarantee financing for equipment and cultivation and encourage the use of new technology, as shown by the use of agricultural land zoning. With regards to family agriculture, over 800 thousand rural inhabitants are assisted by credit, research and extension programs. The special line of credit for women and young farmers is an innovation worth mentioning, providing an incentive towards the entrepreneurial spirit.
With The Land Reform Program, on the other hand, the country's objective is to provide suitable living and working conditions for over one million families who live in areas allotted by the State, an initiative capable of generating two million jobs. Through partnerships, public policies and international partnerships, the government is working towards the guarantee of an infrastructure for the settlements, following the examples of schools and health outlets. The idea is that access to land represents just the first step towards the implementation of a quality land reform program.
Over 600,000 km² of land are divided into approximately five thousand areas of rural property; an agricultural area currently with three borders: the Central-western region (savanna), the Northern region (area of transition) and parts of the Northeastern region (semi-arid). At the forefront of grain crops, which produce over 110 million tonnes/year, is the soybean, yielding 50 million tonnes.
Brazil has the largest cattle herd in the world, with 198 million heads, responsible for exports surpassing the mark of US$ 1 billion/year.
A pioneer and leader in the manufacture of short-fiber timber cellulose, Brazil has also achieved positive results within the packaging sector, in which it is the fifth largest world producer. In the foreign markets, it answers for 25 percent of global exports of raw cane and refined sugar; it is the world leader in soybean exports and is responsible for 80 percent of the planet's orange juice, and since 2003, has had the highest sales figures for beef and chicken, among the countries that deal in this sector.

Industry

Brazil has the second biggest industrial sector in the Americas. Accounting for 28.5 percent of GDP, Brazil's diverse industries range from automobiles, steel and petrochemicals to computers, aircraft, and consumer durables. With increased economic stability provided by the Plano Real, Brazilian and multinational businesses have invested heavily in new equipment and technology, a large proportion of which has been purchased from U.S. firms.
Brazil has a diverse and sophisticated services industry as well. During the early 1990s, the banking sector accounted for as much as 16 percent of the GDP. Although undergoing a major overhaul, Brazil's financial services industry provides local businesses with a wide range of products and is attracting numerous new entrants, including U.S. financial firms. On May 8, 2008, the São Paulo Stock Exchange (Bovespa) and the São Paulo-based Brazilian Mercantile and Futures Exchange (BM&F) merged, creating BM&FBOVESPA, one of the largest stock exchanges in the world. Also, the previously monopolistic reinsurance sector is being opened up to third party companies.
As of 31 December 2007, there were an estimated 21,304,000 broadband lines in Brazil. Over 75 percent of the broadband lines were via DSL and 10 percent via cable modems.
Proven mineral resources are extensive. Large iron and manganese reserves are important sources of industrial raw materials and export earnings. Deposits of nickel, tin, chromite, uranium, bauxite, beryllium, copper, lead, tungsten, zinc, gold, and other minerals are exploited. High-quality cooking-grade coal required in the steel industry is in short supply.

Largest companies

In 2011, 36 Brazilian companies were listed in the Forbes Global 2000 list - an annual ranking of the top 2000 public companies in the world by Forbes magazine. The 13 leading companies were:

|World Rank |Company |Industry |Revenue |Profits |Assets |Market Value |Headquarters |
| | | |(billion $) |(billion $)|(billion $)|(billion $) | |
|20 |Vale |Mining |46.54 |18.12 |132.86 |184.96 |Rio de Janeiro |
|51 |Itaú Unibanco |Banking |71.47 |8.37 |507.84 |115.08 |São Paulo |
|64 |Ambev |Beverage |15.90 |4.75 |54.92 |86.45 |São Paulo |
|80 |Banco Bradesco |Banking |52.43 |6.37 |445.19 |74.32 |Osasco, SP |
|101 |Banco do Brasil |Banking |48.97 |7.00 |546.91 |54.89 |Brasilia |
|203 |OGX |Oil & Gas Operations |14.54 |5.51 |6.74 |39.23 |Rio de Janeiro |
|235 |Itaúsa |Conglomerates |66.44 |2.33 |342.60 |36.08 |São Paulo |
|342 |CSN |Steel & Cement |9.34 |1.94 |16.88 |30.47 |Rio de Janeiro |
|398 |Gerdau |Iron & Steel |23.40 |1.49 |27.66 |23.18 |Porto Alegre |
|487 |Eletrobras |Utilities |16.40 |1.32 |78.45 |21.22 |Rio de Janeiro |
|547 |Usiminas |Mining & Siderurgy |7.95 |1.02 |18.95 |19.33 |Belo Horizonte |
|640 |Embraer |Aerospace & Defense |6.14 |1.03 |15.69 |17.56 |São José dos Campos, SP|

Energy

The Brazilian government has undertaken an ambitious program to reduce dependence on imported petroleum. Imports previously accounted for more than 70% of the country's oil needs but Brazil became self-sufficient in oil in 2006-2007. Brazil is one of the world's leading producers of hydroelectric power, with a current capacity of about 260,000 megawatts. Existing hydroelectric power provides 90 percent of the nation's electricity. Two large hydroelectric projects, the 19,900 megawatt Itaipu Dam on the Paraná River (the world's largest dam) and the Tucurui Dam in Pará in northern Brazil, are in operation. Brazil's first commercial nuclear reactor, Angra I, located near Rio de Janeiro, has been in operation for more than 10 years. Angra II was completed in 2002 and is in operation too. An Angra III has its planned inauguration scheduled for 2014. The three reactors would have combined capacity of 9,000 megawatts when completed. The government also plans to build 19 more nuclear plants by the year 2020.

Economic status

|Statistical Table |
|Inflation (IPCA) |
|2002 |12.53% |
|2003 |9.30% |
|2004 |7.60% |
|2005 |5.69% |
|2006 |3.14% |
|2007 |4.46% |
|2008 |5.91% |
| |
|Gross Fixed Capital Formation|
|(% of GDP) |
|2001 |19.47% |
|2002 |18.32% |
|2003 |17.78% |
|2004 |19.58% |
|2005 |19.99% |
| |
|Average GDP growth rate |
|1950-2008 |
|1950-59 |7.1% |
|1960-69 |6.1% |
|1970-79 |8.9% |
|1980-89 |3.0% |
|1990-99 |1.7% |
|2000-08 |3.7% |

Sustainable growth

After the arrival of the Portuguese explorers in 1500, it was only in 1808 that Brazil obtained a permit from the Portuguese colonial government to set up its first factories and manufacturers. In the 21st century, Brazil reached the status of 8th largest economy in the world. Originally, the export list was basic raw and primary goods, such as sugar, rubber and gold. Today, 84 percent of exports consists of manufactured and semi-manufactured products.
The period of great economic transformation and growth occurred between 1875 and 1975.
In the last decade, domestic production increased by 32.3 percent and agribusiness (agriculture and cattle-raising), which grew by 47 percent or 3.6 percent per year, was the most dynamic sector – even after having weathered international crises that demanded constant adjustments to the Brazilian economy. The Brazilian government also launched a program for economic development acceleration called Programa de Aceleração do Crescimento, aiming to spur growth.
Brazil's transparency ranking status in the international world is 75th according to Transparency International.

Control and reform

Among measures recently adopted in order to balance the economy, Brazil carried out reforms to its Social security (state and retirement pensions) and Tax systems. These changes brought with them a noteworthy addition: a Law of Fiscal Responsibility which controls public expenditure by the Executive Branches at federal, state and municipal levels. At the same time, investments were made towards administration efficiency and policies were created to encourage exports, industry and trade, thus creating "windows of opportunity" for local and international investors and producers.
With these alterations in place, Brazil has reduced its vulnerability: it doesn't import the oil it consumes; it has halved its domestic debt through exchange rate-linked certificates and has seen exports grow, on average, by 20% a year. The exchange rate does not put pressure on the industrial sector or inflation (at 4% a year), and does away with the possibility of a liquidity crisis. As a result, the country, after 12 years, has achieved a positive balance in the accounts which measure exports/imports, plus interest payments, services and overseas payment. Thus, respected economists say that the country won't be deeply affected by the current world economic crisis.

Consistent policies

Support for the productive sector has been simplified at all levels; active and independent, Congress and the Judiciary Branch carry out the evaluation of rules and regulations. Among the main measures taken to stimulate the economy are the reduction of up to 30 percent on Manufactured Products Tax (IPI), and the investment of $8 billion on road cargo transportation fleets, thus improving distribution logistics. Further resources guarantee the propagation of business and information telecenters.
The Policy for Industry, Technology and Foreign Trade, at the forefront of this sector, for its part, invests $19.5 billion in specific sectors, following the example of the software and semiconductor, pharmaceutical and medicine product, and capital goods sectors.

Mergers & acquisitions

Between 1993 and 2010, 7.012 mergers & acquisitions with a total known value of $707 billion USD with the involvement of Brazilian firms have been announced. The year 2010 was a new record in terms of value with $115 bn. of transactions. The largest transaction with involvement of Brazilian companies has been: Cia Vale do Rio Doce acquired Inco in a tender offer valued at $18.9 billions.

Entrepreneurship

According to a search of Global Entrepreneurship Monitor in 2011 Brazil had 27 million adults aged between 18 and 64 either starting or owning a business. It means that more than one in four Brazilian adults were entrepreneurs. In comparison to other 54 countries studied, Brazil stood out as the third-highest one in absolute number. Another interesting fact found by Ipea, a government agency, is that 37 million jobs in Brazil were associated to business with up to 10 employees.
The most recent research of Global Entrepreneurship Monitor revealed this year (2013) that 50.4% of the Brazilian initial entrepreneurs are men, 33.8% are in the 35-44 age group, 36.9% did highschool and 47.9% earn 3-6 Brazilian minimum wages. These are the highest percentage of data that contradict with the data lower, 49.6% of initial entrepreneurs Brazilian female, only 7% of 55–64 years, 1% with postgraduate incomplete and 1.7% entrepreneurs who earn more than 9 times the minimum wage in Brazil.

GDP nominal

This is a list of countries by estimated future nominal GDP based on data from the PwC.
|Rank |Country/Region |2012 GDP (Millions of $US) |
|1 |[pic] United States |14,991,300 |
|2 |[pic] China |7,203,784 |
|3 |[pic] Japan |5,870,357 |
|4 |[pic] Germany |3,604,061 |
|5 |[pic] France |2,775,518 |
|6 |[pic] Brazil |2,476,651 |
|7 |[pic] United Kingdom |2,429,184 |

Income

The median income of the ministers of Supreme Federal Court is more than R$ 300,000.the minimum wage set for the year of 2013 is BRL 8,814.00 or BRL 678.00 per month plus an additional 13th salary in second half of December. The GDP per capita in 2011 was $12,906.
Scope for brazil
Brazil’s widening middle class has increased the country’s level of disposable income per capita. Large oil and gas discoveries in the Santos Basin, and sufficient, fast growing sugar cane offer a natural resource for the biofuels industry. Companies that can have product to support the newly emerged middle class consumer or that can serve the oil and gas and/or biofuel industry should prosper in Brazil.

About brics
The group had its first summit meeting in June 2009 in Yekaterinburg, Russia. In 2010 South Africa was included (at the instigation of China). The enlarged BRICS have since had summit meetings in Brasilia, Brazil, in 2010; Sanya, China, in 2011; New Delhi, India, in 2012; and Durban, South Africa, in 2013. The BRICS now cover 3 billion people, with a total estimated GDP of nearly $14 trillion and around $4 trillion of foreign exchange reserves.
BRICS is one of several new initiatives of different countries in the world to break out of the Northern axis: G12 (G20-G8), IBSA, BASIC (BRICS minus 1) and so on. While the origin of the grouping may be odd, and the countries are indeed remarkably diverse, there are some commonalities that are important. Subsequently, in fact, these countries have since shown significant interest in meeting periodically, working together, and finding some synergies and new ways of cooperation.
So trade between BRICS countries soared after they became recognised as a combination (although of course this is a period when trade between developing and emerging markets in general has grown much faster than aggregate world trade) recently there have been other moves that suggest an appetite for newer and further forms of close economic and political interaction and co-ordination. They have recently acted in concert in several international platforms, most recently pledging $75 billion to the International Monetary Fund (conditional on IMF voting reform). Other economic initiatives include agreement to denominate bilateral trade in each other’s currencies, and plans for a development bank. There have also been declarations in favour of a shared approach in foreign policy, particularly responses to US and European policies in the Middle East and elsewhere. there is great potential in these five countries not just combining to address global issues, but perhaps even more significantly, learning from one another. For example, India has much to learn from Brazil and China in the matter of development banking. From the early 1990s, India has set about destroying the potential of its own development banks, in both agriculture and industry – but there is still scope for their renewal and rejuvenation. And the example of Brazil, and in particular the Brazilian Development Bank (BNDES), in entering areas and promoting activities that would not occur purely through the incentives determined by the market, could provide some guidance about how this can occur even in a very open and largely market-driven economy.

Impact of brics agreements

Financial diversification

It has been argued that geographic diversification would eventually generate superior risk-adjusted returns for long-term global investors by reducing overall portfolio risk while capturing some of the higher rates of return offered by the emerging markets of Asia, Eastern Europe and Latin America. By doing so, these institutional investors have contributed to the financial and economic development of key emerging nations such as Brazil, India, China, and Russia. For global investors, India and China constitute both large-scale production platforms and reservoirs of new consumers, whereas Russia is viewed essentially as an exporter of oil and commodities- Brazil and Latin America being somehow "in the middle".
The countries will provide for developed goods and not just export raw material as they did earlier . this will make them more self sufficient. It will also help in technological advancements and creating more job opportunities .

RUSSIA
The economy of Russia is the eighth largest economy in the world by nominal value and the sixth/ fifth largest by purchasing power parity(PPP)

The Russian economy is currently labeled a developing one by the International Monetary Fund and the World Bank. The country has an abundance of natural resources, including timber, precious metals, and particularly fossil fuels (oil, natural gas, and coal) that can be developed without the constraint of OPEC production quotas and other rules (Russia is not an OPEC member). In recent years, Russia's oil and gas production and pipeline projects have been not only a primary source of Russia's economic growth but also ageostrategic lever in the country's relationship with Europe and Asia.

Since the collapse of the Soviet Union, Russia has undergone significant changes, moving from a centrally planned economy to a moremarket-based and globally integrated economy. Economic reforms of the Shock therapy in the late 1980's and during 1990s privatized many sectors of industry and agriculture, with notable exceptions in the energy and defense-related sectors. Nonetheless, the rapid privatization process, including a much criticized "loans-for-shares" scheme that turned over major state-owned firms to politically connected "oligarchs", has left equity ownership highly concentrated. As of 2011, Russia's capital, Moscow, had the highest number of billionaires of any city in the world.

In late 2008 and early 2009, Russia experienced the first recession after ten years of experiencing a rising economy, until stable growth resumed in late 2009 and 2010. Despite the deep but brief recession, the economy has not been as seriously affected by the global financial crisis, largely because of the integration of short-term macroeconomic policies that helped the economy survive, as well as low levels of sovereign debt. The Russian Government predicts stable growth rates for future years at around 3.4% of GDP.

Economic history

The two important and independent goals – macroeconomic stabilization and economic restructuring – are indicators for a transition from central planning to a market-based economy. The former entailed implementing fiscal and monetary policies that promote economic growth in an environment of stable prices and exchange rates. The latter required establishing commercial, and institutional entities – banks, private property, and commercial legal codes— that permit the economy to operate efficiently. Opening domestic markets to foreign tradeand investment, thus linking the economy with the rest of the world, was an important aid in reaching these goals. The Gorbachev regime failed to address these fundamental goals. At the time of the Soviet Union's demise, the Yeltsin government of the Russian Republic had begun to attack the problems of macroeconomic stabilization and economic restructuring. By mid-1996, results were mixed. Since the collapse of the Soviet Union in 1991, Russia has tried to develop a market economy and achieve consistent economic growth. In October 1991, Yeltsin announced that Russia would proceed with radical, market-oriented reform along the lines of "shock therapy", as recommended by the United States and IMF. However, this policy resulted in economic collapse, with millions being plunged into poverty and corruption and crime spreading rapidly. Hyperinflation resulted from the removal of Soviet price controls and again following the 1998 Russian financial crisis. Assuming the role as the sequel to the legal personality of the Soviet Union, Russia took up the responsibility for settling the USSR's external debts, even though its population made up just half of the population of the USSR at the time of its dissolution. When once all enterprises belonged to the state and were supposed to be equally owned amongst all citizens, they fell into the hands of a few, who became immensely rich. Stocks of state-owned enterprises were issued, and these new publicly traded companies were quickly handed to the members of Nomenklatura or known criminal bosses. For example, the director of a factory during the Soviet regime would often become the owner of the same enterprise. During the same period, violent criminal groups often took over state enterprises, clearing the way by assassinations or extortion. Corruption of government officials became an everyday rule of life. Under the government's cover, outrageous financial manipulations were performed that enriched the narrow group of individuals at key positions of the business and government mafia. Many took billions in cash and assets outside of the country in an enormous capital flight. That being said, there were corporate raiders such as Andrei Volgin engaged in hostile takeovers of corrupt corporations by the mid-1990s.

The largest state enterprises were controversially privatized by President Boris Yeltsin and subsequently owned by insiders for far less than they were worth. Many Russians consider these infamous "oligarchs" to be thieves.

Recovery
[pic]
[pic]
Russian public debt
The Russian economy underwent tremendous stress as it moved from a centrally planned economy to a free market system. Difficulties in implementing fiscal reforms aimed at raising government revenues and a dependence on short-term borrowing to finance budget deficits led to a serious financial crisis in 1998. Lower prices for Russia's major export earners (oil and minerals) and a loss of investor confidence due to the Asian financial crisis exacerbated financial problems. The result was a rapid decline in the value of the ruble, flight of foreign investment, delayed payments on sovereign and private debts, a breakdown of commercial transactions through the banking system, and the threat of runaway inflation.

Russia, however, appears to have weathered the crisis relatively well. As of 2009 real GDP increased by the highest percentage since the fall of the Soviet Union at 8.1%, the ruble remains stable, inflation has been moderate, and investment began to increase again. In 2007 the World Bank declared that the Russian economy had achieved "unprecedented macroeconomic stability".Russia is making progress in meeting its foreign debts obligations. During 2000–01, Russia not only met its external debt services but also made large advance repayments of principal on IMF loans but also built up Central Bank reserves with government budget, trade, and current account surpluses. The FY 2002 Russian Government budget assumes payment of roughly $14 billion in official debt service payments falling due. Large current account surpluses have brought a rapid appreciation of the ruble over the past several years. This has meant that Russia has given back much of the terms-of-trade advantage that it gained when the ruble fell by 60% during the debt crisis. Oil and gas dominate Russian exports, so Russia remains highly dependent upon the price of energy. Loan and deposit rates at or below the inflation rate inhibit the growth of the banking system and make the allocation of capital and risk much less efficient than it would be otherwise.

In 2003, the debt has risen to $19 billion due to higher Ministry of Finance and Eurobond payments. However, $1 billion of this has been prepaid, and some of the private sector debt may already have been repurchased. Russia continues to explore debt swap/exchange opportunities.

In the June 2002 G8 Summit, leaders of the eight nations signed a statement agreeing to explore cancellation of some of Russia's old Soviet debt to use the savings for safeguarding materials in Russia that could be used by terrorists. Under the proposed deal, $10 billion would come from the United States and $10 billion from other G-8 countries over 10 years.

On 1 January 2004, the Stabilization fund of the Russian Federation was established by the Government of Russia as a part of the federal budget to balance it if oil price falls. Now the Stabilization fund of the Russian Federation is being modernized. Stabilization Fund of the Russian Federation will be divided into two parts on 1 February 2008. The first part will become a reserve fund equal to 10 percent of GDP (10% of GDP equals to about $200 billion now), and will be invested in a similar way as Stabilization Fund of the Russian Federation. The second part will be turned into the National Prosperity Fund of Russian Federation. Deputy Finance Minister Sergei Storchak estimates it will reach 600–700 billion rubles by 1 February 2008. The National Prosperity Fund is to be invested into more risky instruments, including the shares of foreign companies. Shyhkin, Maxim. "Stabilization Fund to Be Converted into National Prosperity". Retrieved 2 August 2007.

Sectors

Industrial sector
[pic]
[pic]
Russia's industrial growth per year (%), 1992–2010
Industrial Production in Russia decreased 2.10 percent in February 2013 over the same month in the previous year. Industrial Production in Russia is reported by the Federal State Statistics Service. Historically, from 2006 until 2013, Russia Industrial Production averaged 2.82 Percent reaching an all-time high of 12.60 Percent in May 2010 and a record low of -16.90 Percent in January 2009. In Russia, industrial production measures the output of businesses integrated in industrial sector of the economy such as manufacturing, mining, and utilities. Russia is one of the most industrialized of the former Soviet republics. In the 2000s, Russia's industry, due to increasing demand and improved state finances, emerged from a deep crisis caused by the dissolution of the Soviet Union. However, years of low investment continue to leave their mark on the industry's capabilities and a lot of its equipment is in need of modernization.

Besides its resource-based industries, Russia has developed large manufacturing capacities, notably in machinery. The defense and aircraft industries are important employers and are able to offer internationally competitive products for export.

Defense industry
Russia's defense industry employs 2.5 – 3 million people, accounting for 20% of all manufacturing jobs. Russia is the world's second largest conventional arms exporter after the United States. The most popular types of weaponry bought from Russia are Sukhoi and MiG fighters, air defense systems, helicopters, battle tanks, armored personnel carriers and infantry fighting vehicles. The research organization Centre for Analysis of Strategies and Technologies ranked the air defense system producer Almaz-Antey as the industry's most successful company in 2007, followed by aircraft-maker Sukhoi. Almaz-Antey's revenue that year was $3.122 billion, and it had a work force of 81,857 people.

Aircraft industry
Aircraft manufacturing is an important industry sector in Russia, employing around 355,300 people. The Russian aircraft industry offers a portfolio of internationally competitive military aircraft such as MiG-29 and Su-30, while new projects such as the Sukhoi Superjet 100 are hoped to revive the fortunes of the civilian aircraft segment. In 2009, companies belonging to the United Aircraft Corporation delivered 95 new fixed-wing aircraft to its customers, including 15 civilian models. In addition, the industry produced over 141 helicopters. It is one of the most science-intensive hi-tech sectors and employs the largest number of skilled personnel. The production and value of the military aircraft branch far outstrips other defense industry sectors, and aircraft products make up more than half of the country's arms exports.

Space industry
Space industry of Russia consists of over 100 companies and employs 250,000 people. The largest company of the industry is RKK Energia, the main manned space flight contractor. Leading launch vehicle producers are Khrunichev and TsSKB Progress. Largest satellite developer is Reshetnev Information Satellite Systems, while NPO Lavochkin is the main developer of interplanetary probes.

Automotive industry
[pic]
[pic]
A Lada Kalina Super 1600, painted in khokhlomanational ornaments. Lada is the brand of AvtoVAZ, the largest Russian car manufacturer in the Russian automotive industry.
Automobile production is a significant industry in Russia, directly employing around 600,000 people or 0,7% of the country's total work force. In addition, the industry supports around 2–3 million people in related industries. Russia was the world's 15th largest car producer in 2010, and accounts for about 7% of the worldwide production. In 2009 the industry produced 595,807 light vehicles, down from 1,469,898 in 2008 due to the global financial crisis. The largest companies are light vehicle producers AvtoVAZ and GAZ, while KAMAZ is the leading heavy vehicle producer. 11 foreign carmakers have production operations or are constructing plants in Russia.

Railroad industry
Russian Railways accounts for 2.5% of Russia's GDP. The percentage of freight and passenger traffic that goes by rail is unknown, since no statistics are available for private transportation such as private automobiles or company-owned trucks. In 2007, about 1.3 billion passengers and 1.3 billion tons of freight went via Russian Railways. In 2007 the company owned 19,700 goods and passenger locomotives, 24,200 passenger cars (carriages) (2007) and 526,900 freight cars (goods wagons) (2007). A further 270,000 freight cars in Russia are privately owned (needs source). In 2009 Russia had 128,000 kilometers of common-carrier railroad line, of which about half is electrified and carries most of the traffic, over 40% was double track or better.

Electronics
Russia is experiencing a regrowth of Microelectronics, with the revival of JCS Mikron. An example of a successful Russian consumer electronics company is Telesystems, whose products are sold in over 20 countries.
Telecommunications
Russia's telecommunications industry is growing in size and maturity. As of 31 December 2007, there were an estimated 4,900,000 broadband lines in Russia. Over 72% of the broadband lines were via cable modems and the rest via DSL.

In 2006, there were more than 300 BWA operator networks, accounting for 5% of market share, with dial-up accounting for 30%, and Broadband Fixed Access accounting for the remaining 65%. In December 2006, Tom Phillips, chief government and regulatory affairs officer of the GSM Association stated:

"Russia has already achieved more than 100% mobile penetration thanks to the huge popularity of wireless communications among Russians and the government's good work in fostering a market driven mobile sector based on strong competition.
While there is a lot of interest in a national broadband network, as of January 2007 there still wasn't one.

The financial crisis, which had already hit the country at the end of 2008, caused a sharp reduction of the investments by the business sectors and a notable reduction of IT budget made by government in 2008–2009. As a consequence, in 2009 the IT market in Russia declined by more than 20% in ruble terms and by one third in euro terms. Among the particular segments, the biggest share of the Russian IT market still belongs to hardware.

Agriculture

Russia comprises roughly three-quarters of the territory of the former Soviet Union. Following the breakup of the Soviet Union in 1991 and after nearly 10 years of decline, Russian agriculture began to show signs of improvement due to organizational and technological modernization. Northern areas concentrate mainly on livestock, and the southern parts and western Siberia produce grain. The restructuring of former state farms has been an extremely slow process. The new land code passed by the Duma in 2002 should speed restructuring and attract new domestic investment to Russian agriculture. Private farms and garden plots of individuals account for over one-half of all agricultural production.

Trade [pic] [pic] Russian current account due to trade surplus
Russia recorded a trade surplus of 17742 USD Million in January 2013. Balance of Trade in Russia is reported by the Central Bank of Russia. Historically, from 1997 until 2013, Russia Balance of Trade averaged 8338.23 USD Million reaching an all-time high of 20647 USD Million in December 2011 and a record low of -185 USD Million in February 1998. Russia runs regular trade surpluses primarily due to exports of commodities. Russia main exports are oil and natural gas (58 percent of total exports), nickel, palladium, iron and chemical products. Others include: cars, military equipment and timber. Russia imports food, ground transports, pharmaceuticals and textile and footwear. Main trading partners are: China (7 percent of total exports and 10 percent of imports), Germany (7 percent of exports and 8 percent of imports) and Italy. This page includes a chart with historical data for Russia Balance of Trade. Exports in Russia decreased to 39038 USD Million in January 2013 from 48568 USD Million in December 2012. Exports in Russia is reported by the Central Bank of Russia. Historically, from 1994 until 2013, Russia Exports averaged 18668.83 USD Million reaching an all-time high of 51338 USD Million in December 2011 and a record low of 4087 USD Million in January 1994. Russia is the fifth largest economy in the world and is a leading exporter of oil and natural gas. In Russia, services are the biggest sector of the economy and account for 58 percent of GDP. Within services the most important segments are: wholesale and retail trade, repair of motor vehicles, motorcycles and personal and household goods (17 percent of total GDP); public administration, health and education (12 percent); real estate (9 percent) and transport storage and communications (7 percent). Industry contributes 40 percent to total output. Mining (11 percent of GDP), manufacturing (13 percent) and construction (4 percent) are the most important industry segments. Agriculture accounts for the remaining 2 percent. This page includes a chart with historical data for Russia Exports. Imports in Russia decreased to 21296 USD Million in January 2013 from 31436 USD Million in December 2012. Imports in Russia is reported by the Central Bank of Russia. Historically, from 1994 until 2013, Russia Imports averaged 11392.06 USD Million reaching an all-time high of 31553 USD Million in October 2012 and a record low of 2691 USD Million in January 1999. Russia main imports are food (13 percent of total imports) and ground transports (12 percent). Others include: pharmaceuticals, textile and footwear, plastics and optical instruments. Main import partners are China (10 percent of total imports) and Germany (8 percent). Others include: Italy, France, Japan and United States. This page includes a chart with historical data for Russia Imports.

In 1999, exports were up slightly, while imports slumped by 30.5%. As a consequence, the trade surplus ballooned to $33.2 billion, more than double the previous year's level. In 2001, the trend shifted, as exports declined while imports increased. World prices continue to have a major effect on export performance, since commodities, particularly oil, natural gas, metal, and the timber comprise 80% of Russian exports. Ferrous metals exports suffered the most in 2001, declining by 7.5%. On the import side, steel and grains dropped by 11% and 61%, respectively.

Most analysts predicted that these trade trends would continue to some extent in 2002. In the first quarter of 2002, import expenditures were up 12%, increased by goods and a rapid rise of travel expenditure. The combination of import duties, a 20% value-added tax and excise taxes on imported goods (especially automobiles, alcoholic beverages, and aircraft) and an import licensing regime for alcohol still restrain demand for imports. Frequent and unpredictable changes in customs regulations also have created problems for foreign and domestic traders and investors. In March 2002, Russia placed a ban on poultry from the United States. In the first quarter of 2002, exports were down 10% as falling income from goods exports was partly compensated for by rising services exports, a trend since 2000. The trade surplus decreased to $7 billion from well over $11 billion the same period last year.

[pic] [pic] Russian exports in 2006
Foreign trade rose 34% to $151.5 billion in the first half of 2005, mainly due to the increase in oil and gas prices which now form 64% of all exports by value. Trade with CIS countries is up 13.2% to $23.3 billion. Trade with the EU forms 52.9%, with the CIS 15.4%, Eurasian Economic Community 7.8% and Asia-Pacific Economic Community 15.9%

[pic] [pic] Graphical depiction of Russia's product exports
Trade volume between China and Russia reached $29.1 billion in 2005, an increase of 37.1% compared with 2004. China’s export of machinery and electronic goods to Russia grew 70%, which is 24% of China’s total export to Russia in the first 11 months of 2005. During the same time, China’s export of high-tech products to Russia increased by 58%, and that is 7% of China’s total exports to Russia. Also in this time period border trade between the two countries reached $5.13 billion, growing 35% and accounting for nearly 20% of the total trade. Most of China’s exports to Russia remain apparel and footwear.

Russia is China’s eighth largest trade partner and China is now Russia’s fourth largest trade partner.

China now has over 750 investment projects in Russia, involving $1.05 billion. China’s contracted investment in Russia totaled $368 million during January–September 2005, twice that in 2004.

Chinese imports from Russia are mainly those of energy sources, such as crude oil, which is mostly transported by rail, and electricity exports from neighboring Siberian and Far Eastern regions. Exports of both of these commodities are increasing, as Russia opened the Eastern Siberia–Pacific Ocean oil pipeline's branch to China, and Russian power companies are building some of its hydropower stations with a view of future exports to China. Despite all this Russia still exports more to China by amount of 21.23 billion US dollars in comparison to an import of 17.52 Billions in 2009.

Information technology
[pic]
[pic]
Russia has more academic graduates than any other country in Europe.(And World leader in percentage of population with associate's degree or higher: 54%, compared to 31% in UK) However, critics claim that about 50 out of 1,100 Russian Universities are up to international standards
The IT market is one of the most dynamic sectors of the Russian economy. Russian software exports have risen from just $120 million in 2000 to $3.3 billion in 2010. Since the year 2000 the IT market has******started growth rates of 30–40 percent a year, growing by 54% in 2006 alone. The biggest sector in terms of revenue is system and network integration, which accounts for 28.3% of the total market revenues. Meanwhile the fastest growing segment of the IT market is offshore programming.

Currently Russia controls 3% of the offshore software development market and is the third leading country (after India and China) among software exporters. Such growth of software outsourcing in Russia is caused by a number of factors. One of them is the supporting role of the Russian Government. The government has launched a program promoting construction of IT-oriented technology parks (Technoparks) – special zones that have an established infrastructure and enjoy a favorable tax and customs regime, in seven different places around the country: Moscow, Novosibirsk, Nizhny Novgorod, Kaluga, Tumen, Republic of Tatarstan and St. Peterburg Regions. Another factor stimulating the IT sector growth in Russia is the presence of global technology corporations such as Intel, Google, Motorola, Sun Microsystems, Boeing, Nortel, Hewlett-Packard, SAP AG, and others, which have intensified their software development activities and opened their R&D centers in Russia.

Under a government decree signed On June 2013, a special "roadmap" is expected to ease business suppliers’ access to the procurement programs of state-owned infrastructure monopolies, including such large ones as Gazprom, Rosneft, Russian Railways,Rosatom, and Transneft. These companies will be expected to increase the proportion of domestic technology solutions they use in their operations. The decree puts special emphasis on purchases of innovation products and technologies. According to the new decree, by 2015, government-con*****ed companies must double their purchases of Russian technology solutions compared to the 2013 level and their purchasing levels must quadruple by 2018.

Nanotechnology
In its push to diversify Russia's research and development in emerging technologies, The Putin government has announced a massive $7 billion investment program in nanotechnology. As part of the program, during 2007, $5 billion is being invested into a new state corporation, Rosnanotech, that will be responsible for overseeing and coordinating research in the area.

In criticism of the initiative, it has been noted that the Russian nanotech program will receive three times more state funding than the rest of Russia's scientists put together.

Apart from public funding, Mikhail Prokhorov, a leading Russian metals and banking tycoon, has announced the creation of a $17.5 billion holding company that will focus on high-tech investments, including alternative energy and nanotechnology.

Transportation
Construction market
Russian construction industry has survived its most difficult year for more than a decade. The 0.8% reduction recorded by the industry for the first three quarters of 2010 looks remarkably healthy in comparison with the 18.4% slump recorded last year, and construction firms are now much more optimistic about the future than they were just a few months ago. The most successful of them have concluded contracts worth billions of dollars and are planning to take on employees and purchase new building machinery. The downturn served to emphasise the importance of the government to the construction market.

Retail
As of 2013, Russians spent 60% of their pre-tax income shopping, the highest percentage in Europe. This is possible because many Russians pay no rent or house payments, owning their own home after privatization of state-owned Soviet housing. Shopping malls were popular with international investors and shoppers from the emerging middle class. 82 malls had been built near major cities including a few that were very large. A supermarket selling groceries is a typical anchor store in a Russian mall.

Investment

[pic]
[pic]
Oil price records, prompt higher FDI inflows
In 1999, investment increased by 4.5%, the first such growth since 1990. Investment growth has continued at high rates from a very low base, with an almost 30% increase in total foreign investments in 2001 compared to the previous year. Higher retained earnings, increased cash transactions, the positive outlook for sales, and political stability have contributed to these favorable trends. Foreign investment in Russia is very low. Cumulative investment from U.S. sources of about $4 billion are about the same as U.S. investment in Costa Rica. Over the medium-to-long term, Russian companies that do not invest to increase their competitiveness will find it harder either to expand exports or protect their recent domestic market gains from higher quality imports.

Foreign direct investment, which includes contributions to starting capital and credits extended by foreign co-owners of enterprises, rose slightly in 1999 and 2000, but decreased in 2001 by about 10%. Foreign portfolio investment, which includes shares and securities, decreased dramatically in 1999, but has experienced significant growth since then. In 2001, foreign portfolio investment was $451 million, more than twice the amount from the previous year. Inward foreign investment during the 1990s was dwarfed by Russian capital flight, estimated at about $15 billion annually. During the years of recovery following the 1998 debt crisis, capital flight seems to have slowed. Inward investment from Cyprus and Gibraltar, two important channels for capital flight from Russia in recent years, suggest that some Russian money is returning home.

A significant drawback for investment is the banking sector, which lacks the resources, the capability, and the trust of the population that it would need to attract substantial savings and direct it toward productive investments. Russia's banks contribute only about 3% of overall investment in Russia. While ruble lending has increased since the August 1998 financial crisis, loans are still only 40% of total bank assets. The Central Bank of Russia reduced its refinancing rate five times in 2000, from 55% to 25%, signaling its interest in lower lending rates. Interest on deposits and loans are often below the inflation rate. The poorly developed banking system makes it difficult for entrepreneurs to raise capital and to diversify risk. Banks still perceive commercial lending as risky, and some banks are inexperienced with assessing credit risk.

Money on deposit with Russian banks represents only 7% of GDP. Sberbank receives preferential treatment from the state and holds 73% of all bank deposits. In March 2002, Sergei Ignatyevreplaced Viktor Gerashchenko as Chairman of the Russian Central Bank. Under his leadership, necessary banking reforms, including stricter accounting procedures and federal deposit insurance, were implemented.

Strategic sectors and enterprises
In the Russian law, there are sectors of the economy which are considered to be crucial for national security and foreign companies are restricted from owning them. Investments in the so-called Strategic Sectors are defined in a law adopted by the Federal Assembly of Russia. Strategic enterprises are a list of state owned corporations which privatization and new share issues of require explicit approval of the President. It began with a Presidential Decree with list of more than 1000 state owned firms dated from 2004, which was amended several times.

Mergers and acquisitions
From 1993 to 2010, Russian companies have been involved as either an acquirer or acquired company in 13,834 mergers and acquisitions with a total known value of 613 bil. USD. The number of deals that happened in 2010 have been 3,662, which is a new record; compared to 2009 this was an increase of 12%. The value of deals in 2010 was US$100 billion, which was the second highest number ever; compared to 2009 this was an increase of 143%.

|INDIA |
| |
|Mumbai, The entertainment, and commercial capital of India |
|Rank |9th (nominal) / 3rd (PPP) |
|Currency |1 (INR) ([pic]) = 100 Paise |
|Fiscal year |1 April – 31 March |
|Trade organizations |WTO, SAFTA,BRIC, G-20 and others |
|Statistics |
|GDP | |
| |$1.824 trillion (nominal) 10th; 2012) ;$4.684 trillion (PPP: 3rd; 2012) |
|GDP growth |3.986% (2012–13) |
|GDP per capita |$1,491 (nominal: 141st; 2012) ;$3,829 (PPP: 130th; 2012) |
|GDP by sector |Agriculture: 17.4%, industry: 25.8%, services: 56.9% (2012 est.) |
|Inflation (CPI) |CPI: 9.31%, WPI: 4.7% (April 2013) |
|Population |29.8% (2010) |
|below poverty line | |
|Gini coefficient |36.8 (List of countries) |
|Labour force |498.4 million (2012 est.) (includes child labour) |
|Labour force |Agriculture: 51.1%, industry: 22.4%, services: 26.6% (2012 est.) |
|by occupation | |
|Unemployment |3.8% (2011 est.) |
|Average gross salary |$1,410 yearly (2011) |
|Main industries |textiles, chemicals, food processing, steel, transportation equipment, cement, mining, |
| |petroleum, machinery, software, pharmaceuticals |
|Ease of doing business rank |132nd (2012) |
| |
|External |
|Exports |$309.1 billion (2012 est.) |
|Export goods |software, petrochemicals, pharmaceuticals, precious stones, textiles, machinery, iron ore,|
| |chemicals, automobiles |
|Main export partners |United States 12.7% |
| |United Arab Emirates 12.3% |
| |China 5.0% |
| |Singapore 5.0% |
| |Hong Kong 4.1% (2012 est.) |
|Imports |$488.6 billion (2012 est.) |
|Import goods |crude oil, raw precious stones, machinery, fertilizer, coal, steel, chemicals |
|Main import partners |China 11.0% |
| |United Arab Emirates 7.7% |
| |Saudi Arabia 6.7% |
| |Switzerland 5.9% |
| |United States 4.9% (2012 est.) |
|FDI stock |$47 billion (2011–12) |
|Gross external debt |$299.2 billion (31 December 2012) |
| |
|Public finances |
|Public debt |67.59% of GDP (2012 est.) |
|Budget deficit |5.2% of GDP (2011–12) |
|Revenues |$171.5 billion billion (2012 est.) |
|Expenses |$281 billion billion (2012 est.) |
|Economic aid |$2.107 billion (2008) |
|Foreign reserves |$295.29 billion (October 2012) |
| |
|Main data source: CIA World Fact Book |
|All values, unless otherwise stated, are in US dollars |

Economic development in India • The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP).

• The country is one of the G-20 major economies and a member of BRICS.

• On a per-capita-income basis, India ranked 141st by nominal GDP and 130th by GDP (PPP) in 2012, according to the IMF.

• India is the 19th-largest exporter and the 10th-largest importer in the world.

• The economy slowed to around 5.0% for the 2012–13 fiscal year compared with 6.2% in the previous fiscal.

• On 28 August 2013 the Indian rupee hit an all time low of 68.80 against the US dollar. In order to control the fall in rupee, the government introduced capital controls on outward investment by both corporates and individuals.

• India's GDP grew by 9.3% in 2010–11; thus, the growth rate has nearly halved in just three years.

• GDP growth rose marginally to 4.8% during the quarter through March 2013, from about 4.7% in the previous quarter. The government has forecast a growth rate of 6.1%-6.7% for the year 2013–14, whilst the RBI expects the same to be at 5.7%.

• Besides this, India suffered a very high fiscal deficit of US$ 88 billion (4.8% of GDP) in the year 2012–13. The Indian Government aims to cut the fiscal deficit to US$ 70 billion or 3.7% of GDP by 2013–14.

The independence-era Indian economy (from 1947 to 1991) was based on a mixed economy combining features of capitalism and socialism, resulting in an inward-looking, interventionist policies and import-substituting economy that failed to take advantage of the post-war expansion of trade. This model contributed to widespread inefficiencies and corruption, and the failings of this system were due largely to its poor implementation.
In 1991, India adopted liberal and free-market principles and liberalised its economy to international trade under the guidance of Former Finance minister Manmohan Singh under the Prime Ministry of P.V. Narasimha Rao, prime minister from 1991 to 1996, who had eliminated Licence Raj, a pre- and post-British era mechanism of strict government controls on setting up new industry. Following these major economic reforms, and a strong focus on developing national infrastructure such as the Golden Quadrilateral project by former Prime Minister Atal Bihari Vajpayee, the country's economic growth progressed at a rapid pace, with relatively large increases in per-capita incomes.
Overview
The combination of protectionist, import-substitution, and Fabian social democratic-inspired policies governed India for sometime after the end of British occupation. The economy was then characterised by extensive regulation, protectionism, public ownership of large monopolies, pervasive corruption and slow growth. Since 1991, continuing economic liberalisation has moved the country towards a market-based economy. By 2008, India had established itself as one of the world's fastest growing economies. Growth significantly slowed to 6.8% in 2008–09, but subsequently recovered to 7.4% in 2009–10, while the fiscal deficit rose from 5.9% to a high 6.5% during the same period. India's current account deficit surged to 4.1% of GDP during Q2 FY11 against 3.2% the previous quarter. The unemployment rate for 2010–11, according to the state Labour Bureau, was 9.8% nationwide. As of 2011, India's public debt stood at 68.05% of GDP which is highest among the emerging economies. However, inflation remains stubbornly high with 7.55% in August 2012, the highest amotrade (counting exports and imports) stands at $606.7 billion and is currently the 9th largest in the world. During 2011–12, India's foreign trade grew by an impressive 30.6% to reach $792.3 billion (Exports-38.33% & Imports-61.67%).

Pre-liberalization policies
Indian economic policy after independence was influenced by the colonial experience (which was seen by Indian leaders as exploitative in nature) and by those leaders' exposure to Fabian socialism. Policy tended towards protectionism, with a strong emphasis on import substitution, industrialisation under state monitoring, state intervention at the micro level in all businesses especially in labour and financial markets, a large public sector, business regulation, and central planning. Five-Year Plans of India resembled central planning in the Soviet Union. Steel, mining, machine tools, water, telecommunications, insurance, and electrical plants, among other industries, were effectively nationalised in the mid-1950s. Elaborate licences, regulations and the accompanying red tape, commonly referred to as Licence Raj, were required to set up business in India between 1947 and 1990.
Before the process of reform began in 1991, the government attempted to close the Indian economy to the outside world. The Indian currency, the rupee, was inconvertible and high tariffs and import licencing prevented foreign goods reaching the market. India also operated a system of central planning for the economy, in which firms required licences to invest and develop. The labyrinthine bureaucracy often led to absurd restrictions—up to 80 agencies had to be satisfied before a firm could be granted a licence to produce and the state would decide what was produced, how much, at what price and what sources of capital were used. The government also prevented firms from laying off workers or closing factories. The central pillar of the policy was import substitution, the belief that India needed to rely on internal markets for development, not international trade—a belief generated by a mixture of socialism and the experience of colonial exploitation. Planning and the state, rather than markets, would determine how much investment was needed in which sectors.
In the 80s, the government led by Rajiv Gandhi started light reforms. The government slightly reduced Licence Raj and also promoted the growth of the telecommunications and software industries.
The Vishwanath Pratap Singh (1989–1990) and Chandra Shekhar Singh government (1990–1991) did not add any significant reforms.
Impact
• The low annual growth rate of the economy of India before 1980, which stagnated around 3.5% from 1950s to 1980s, while per capita income averaged 1.3%.At the same time, Pakistan grew by 5%, Indonesia by 9%, Thailand by 9%, South Korea by 10% and Taiwan by 12%.

• Only four or five licences would be given for steel, electrical power and communications. Licence owners built up huge powerful empires.

• A huge private sector emerged. State-owned enterprises made large losses.

• Income Tax Department and Customs Department became efficient in checking tax evasion.

• Infrastructure investment was poor because of the public sector monopoly.

• Licence Raj established the "irresponsible, self-perpetuating bureaucracy that still exists throughout much of the country" and corruption flourished under this system.

Narasimha Rao government (1991–1996)
Crisis
1991 India economic crisis
The assassination of Prime Minister Indira Gandhi in 1984, and later of her son Rajiv Gandhi in 1991, crushed international investor confidence on the economy that was eventually pushed to the brink by the early 1990s.
As of 1991, India still had a fixed exchange rate system, where the rupee was pegged to the value of a basket of currencies of major trading partners. India started having balance of payments problems since 1985, and by the end of 1990, it was in a serious economic crisis. The government was close to default, its central bank had refused new credit and foreign exchange reserves had reduced to the point that India could barely finance three weeks’ worth of imports. Most of the economic reforms were forced upon India as a part of the IMF bailout.
A Balance of Payments crisis in 1991 pushed the country to near bankruptcy. In return for an IMF bailout, gold was transferred to London as collateral, the rupee devalued and economic reforms were forced upon India. That low point was the catalyst required to transform the economy through badly needed reforms to unshackle the economy. Controls started to be dismantled, tariffs, duties and taxes progressively lowered, state monopolies broken, the economy was opened to trade and investment, private sector enterprise and competition were encouraged and globalisation was slowly embraced. The reforms process continues today and is accepted by all political parties, but the speed is often held hostage by coalition politics and vested interests.
Later reforms
•The Bharatiya Janata Party (BJP)-Atal Bihari Vajpayee administration surprised many by continuing reforms, when it was at the helm of affairs of India for five years.
•The BJP-led National Democratic Alliance Coalition began privatising under-performing government owned business including hotels, VSNL, Maruti Suzuki, and airports, and began reduction of taxes, an overall fiscal policy aimed at reducing deficits and debts and increased initiatives for public works.
•The United Front government attempted a progressive budget that encouraged reforms, but the 1997 Asian financial crisis and political instability created economic stagnation.
•Towards the end of 2011, the Government initiated the introduction of 51% Foreign Direct Investment in retail sector. But due to pressure from fellow coalition parties and the opposition, the decision was rolled back. However, it was approved in December 2012.

Impact of reforms
The impact of these reforms may be gauged from the fact that total foreign investment (including foreign direct investment, portfolio investment, and investment raised on international capital markets) in India grew from a minuscule US$132 million in 1991–92 to $5.3 billion in 1995–96.
Cities like Chennai, Bangalore, Hyderabad, NOIDA, Gurgaon, Gaziabad, Pune, Jaipur, Indore and Ahmedabad have risen in prominence and economic importance; become centres of rising industries and destination for foreign investment and firms.
Annual growth in GDP per capita has accelerated from just 1¼ per cent in the three decades after Independence to 7½ per cent currently, a rate of growth that will double average income in a decade. In service sectors where government regulation has been eased significantly or is less burdensome—such as communications, insurance, asset management and information technology—output has grown rapidly, with exports of information technology enabled services particularly strong. In those infrastructure sectors which have been opened to competition, such as telecoms and civil aviation, the private sector has proven to be extremely effective and growth has been phenomenal.
Election of AB Vajpayee as Prime Minister of India in 1998 and his agenda was a welcome change. His prescription to speed up economic progress included solution of all outstanding problems with the West (Cold War related) and then opening gates for FDI investment. In three years, the West was developing a bit of a fascination to India's brainpower, powered by IT and BPO. By 2004, the West would consider investment in India, should the conditions permit. By the end of Vajpayee's term as prime minister, a framework for the foreign investment had been established. The new incoming government of Dr. Manmohan Singh in 2004 is further strengthening the required infrastructure to welcome the FDI.
Today, fascination with India is translating into active consideration of India as a destination for FDI. The A T Kearney study is putting India second most likely destination for FDI in 2005 behind China. It has displaced US to the third position. This is a great leap forward. India was at the 15th position, only a few years back. To quote the A T Kearney Study “India's strong performance among manufacturing and telecom & utility firms was driven largely by their desire to make productivity-enhancing investments in IT, business process outsourcing, research and development, and knowledge management activities”.
Ongoing economic challenges
•Problems in the agricultural sector.
•Highly restrictive and complex labour laws.
•Inadequate infrastructure, which is often government monopoly.
•Inefficient public sector.
•Inflation in basic consumable goods.
•Increasing Gap between the Lower and Upper Classes.
•Corruption
•High fiscal deficit
•Stagnant export and increasing Imports.
•High Current Account Deficit.
•High rate of Inflation.
•Slowing Economy.
OECD summarised the key reforms that are needed:
In labour markets, employment growth has been concentrated in firms that operate in sectors not covered by India's highly restrictive labour laws. In the formal sector, where these labour laws apply, employment has been falling and firms are becoming more capital intensive despite abundant low-cost labour. Labour market reform is essential to achieve a broader-based development and provide sufficient and higher productivity jobs for the growing labour force. In product markets, inefficient government procedures, particularly in some of the states, acts as a barrier to entrepreneurship and need to be improved. Public companies are generally less productive than private firms and the privatisation programme should be revitalised. A number of barriers to competition in financial markets and some of the infrastructure sectors, which are other constraints on growth, also need to be addressed. The indirect tax system needs to be simplified to create a true national market, while for direct taxes, the taxable base should be broadened and rates lowered. Public expenditure should be re-oriented towards infrastructure investment by reducing subsidies. Furthermore, social policies should be improved to better reach the poor and—given the importance of human capital—the education system also needs to be made more efficient.
Reforms at the state level
The Economic Survey of India 2007 by OECD concluded:
At the state level, economic performance is much better in states with a relatively liberal regulatory environment than in the relatively more restrictive states".
The analysis of this report suggests that the differences in economic performance across states are associated with the extent to which states have introduced market-oriented reforms. Thus, further reforms on these lines, complemented with measures to improve infrastructure, education and basic services, would increase the potential for growth outside of agriculture and thus boost better-paid employment, which is a key to sharing the fruits of growth and lowering poverty.

CHINA

China’s currency policy is adding materially to the word’s economic problems at a time when the problems are already severe. It is time to take a stand - Paul Krugman

The socialist market economy of China is the world's second largest economy by nominal GDP and by purchasing power parity after the United States. It is the world's fastest-growing major economy, with growth rates averaging 10% over the past 30 years. China is also the largest exporter and second largest importer of goods in the world. China is the largest manufacturing economy in the world, outpacing its world rival in this category, the service-driven economy of the United States of America. On a per capita income basis, China ranked 87th by nominal GDP and 92nd by GDP (PPP) in 2012, according to the International Monetary Fund (IMF). Most of China's economic growth is created from Special Economic Zones of the People's Republic of China that spread successful economic experiences to other areas.

China's fiscal year follows the calendar year (January 1 to December 31).

China’s Economy Prior to Reforms

Prior to 1979, China, under the leadership of Chairman Mao Zedong, maintained a centrally planned, or command, economy. During the 1950s, all of China’s individual household farms were collectivized into large communes. By 1978 nearly three-fourths of industrial production was produced by centrally controlled, state-owned enterprises (SOEs). A central goal of the Chinese government was to make China’s economy relatively self-sufficient. Foreign trade was generally limited to obtaining only those goods that could not be made or obtained in China. Government policies kept the Chinese economy relatively stagnant and inefficient

Chinese living standards were substantially lower than those of many other developing countries. In 1978, free market policy was introduced.

The Introduction of Economic Reforms

The central government initiated price and ownership incentives for farmers, which enabled them to sell a portion of their crops on the free market. The government established four special economic zones along the coast for the purpose of attracting foreign investment, boosting exports, and importing high technology products into China. Additional reforms, followed to decentralize economic policymaking in several sectors, especially trade. Economic control of various enterprises was given to provincial and local governments, which were generally allowed to operate and compete on free market principles, rather than under the direction and guidance of state planning. In addition, citizens were encouraged to start their own businesses.Removing trade barriers encouraged greater competition and attracted foreign direct investment (FDI) inflows.

2005–present

The conservative Hu-Wen Administration began to reverse some of Deng Xiaoping's reforms in 2005. (Deng’s Theory emphasized economic construction and stability. Deng's social and economic philosophy attempted to merge a market economic model with a Marxist-Leninist political system. This became known as socialism with Chinese characteristics. Deng also stressed opening China to the outside world, the implementation of one country, two systems, and the phrase "seek truth from facts", advocating for political and economic pragmatism). The government adopted more egalitarian and populist policies. Increased subsidies and control over the health care sector, halted privatization and adopted a loose monetary policy. The privileged state sector was the primary recipient of government investment, which under the new administration, promoted the rise of large "national champions" which could compete with large foreign corporations. The global economic slowdown, which began in 2008, impacted the Chinese economy (especially the export sector). In response; the Chinese government implemented a large economic stimulus package and an expansive monetary policy. In 2010, China’s real GDP grew by 10.4%, and in 2011 it rose by 9.2%.

Tax system in China

Taxes provide the most important revenue source for the Government of the People's Republic of China. As the most important source of fiscal revenue, tax is a key economic player of macro-economic regulation, and greatly affects China's economic and social development. China's tax revenue came to 6.31 trillion Yuan (924 billion U.S. dollars) in 2009, up 9.1 percent on 2008

Agriculture

During the pre-reform period, Chinese agricultural performance was extremely poor and food shortages were common. After Deng Xiaoping implemented the household responsibility system, agricultural output increased by 8.2 percent a year, compared with 2.7% in the pre-reform period, despite a decrease in the area of land used. Food prices fell nearly 50%, while agricultural incomes rose. Growing adoption of cash crops instead of just growing rice and grain. Growth in the sector slowed after 1984, with agriculture falling from 40% of GDP to 16%; however, increases in agricultural productivity allowed workers to be released for work in industry and services, while simultaneously increasing agricultural production. Trade in agriculture was also liberalized and China became an exporter of foodstuffs.

Industry

China is now the world's biggest producer of concrete, steel, ships and textiles, and has the world's largest automobile market. This increase in production is largely the result of the removal of barriers to entry and increased competition. Compared to other East Asian industrial growth spurts, China's industrial performance exceeded Japan's but remained behind South Korea and Taiwan's economies.

Trade and foreign investment

Foreign investment helped to greatly increase quality, knowledge and standards, especially in heavy industry. Throughout the reform period, the government reduced tariffs and other trade barriers, with the overall tariff rate falling from 56% to 15%. By 2001, less than 40% of imports were subject to tariffs and only 9 percent of imports were subject to licensing and import quotas. Trade has increased from under 10% of GDP to 64% of GDP over the same period. Foreign investment was also liberalized upon Deng's ascension. Special Economic Zones (SEZs) were created in the early 1980s to attract foreign capital by exempting them from taxes and regulations. This experiment was successful and SEZs were expanded to cover the whole Chinese coast.

Service

In the 1990s, the financial sector was liberalized and foreign investment was allowed after China joined the World Trade Organization (WTO). Banking, financial services, insurance and telecommunications were opened up to foreign investment. China's banking sector is dominated by four large state-owned banks, which are largely inefficient and monopolistic. China's largest bank, ICBC (Industrial and Commercial Bank of China Ltd), is the largest bank in the world. China has two stock exchange markets, the Shanghai Stock Exchange and Shenzhen Stock Exchange.
Government finances

In the pre-reform era, government was funded by profits from state-owned enterprises.As the state sector fell in importance and profitability, government revenues, especially that of the central government in Beijing, fell substantially and the government relied on a confused system of inventory taxes. Government revenues fell from 35% of GDP to 11% of GDP in the mid-1990s, excluding revenue from state-owned enterprises, with the central government's budget at just 3% of GDP.The tax system was reformed in 1994 when inventory taxes were unified into a single VAT of 17% on all manufacturing, repair, and assembly activities and an excise tax on 11 items. The VAT became the main income source, accounting for half of government revenue. The 1994 reform also increased the central government's share of revenues, increasing it to 9 percent of GDP

Foreign Banks

Since the inception of the "open door policy", a number of foreign banks have been permitted to open their doors in major cities in China. However, these are largely representative branches, with only a few being permitted to carry out branch functions in Shanghai and Shenzhen. Their participation in China's financial system has been limited, but as China starts to borrow more from abroad, their role may become greater in the future.

Currency and Exchange rates

China’s currency is the renminbi (RMB, "people’s currency") or yuan. Coins are issued in denominations of one, two, and five fen; one and five jiao, and one RMB. Banknotes are issued in denominations of one, two, and five jiao; and one, two, five, 10, 50, and 100 RMB.

Recently China devalued its exchange rate, which has become a burning issue in the global economy. Statistically, it has undervalued its currency by 40%! The global economies, especially the US as it has the maximum trade deficit with China will be more vulnerable if it continues.

Reference • Naughton 2008, p. 129 • The times, China's New Healthcare could cover millions more,http://www.time.com/time/world/article/0,8599,1890306,00.html • Chovanec, Patrick (2009-06-08). "China's Real Estate Riddle". Far East Economic Review.http://www.feer.com/economics/2009/june53/Chinas-Real-Estate-Riddle. Retrieved 13 March 2010. • Huang 2008, p. 478 • Huang 2008, p. 480 • Branstetter 2008, p. 669 • Brandt 2008, p. 13 • Rawski 2008, p. 570 • Branstetter 2008, pp. 635–638 • Branstetter 2008, p. 655 • Brandt 2008, pp. 1–3 • Wong 2008, p. 440 • Wong 2008, p. 434 • Globalization and China’s Economic and Financial Development Gregory C. Chow • http://en.wikipedia.org/wiki/Chinese_economic_reform#2005.E2.80.93present • http://fpc.state.gov/documents/organization/194783.pdf • http://en.wikipedia.org/wiki/Deng_Xiaoping_Theory

SOUTH AFRICA

Introduction

The economy of South Africa is the largest in Africa, accounts for 24% of its gross domestic product in terms of purchasing power parity, and is ranked as an upper-middle income economy by the World Bank; this makes the country one of only four countries in Africa in this category (the others being Botswana, Gabon and Mauritius). Since 1996, South Africa's Gross Domestic Product has since almost tripled to $400 billion, and foreign exchange reserves have increased from $3 billion to nearly $50 billion; creating a growing and sizable African middle class, within two decades of establishing democracy and ending apartheid.
South Africa has a comparative advantage in the production of agriculture, mining and manufacturing products relating to these sectors.[14]South Africa has shifted from a primary and secondary economy in the mid-twentieth century to an economy driven primarily by the tertiary sector in the present day which accounts for an estimated 65% of GDP or $230 billion in nominal GDP terms. According to official estimates, a quarter of the population is unemployed, According to a 2013 Goldman Sachs report, that number increases to 35% when including people who have given up looking for work. A quarter of South Africans live on less than US $1.25 a day.
South Africa held its first multi-racial elections in 1994, leaving the newly elected African National Congress (ANC) government the daunting task of trying to restore order to an economy harmed by sanctions, while also integrating the previously disadvantaged segment of the population into it. The 1994 government inherited an economy wracked by long years of internal conflict and external sanctions.

The government refrained from resorting to economic populism. Inflation was brought down, public finances were stabilised, and some foreign capital was attracted. However, growth was still subpar. At the start of 2000, then President Thabo Mbeki vowed to promote economic growth and foreign investment by relaxing restrictive labour laws, stepping up the pace of privatisation, and cutting unneeded governmental spending. His policies face strong opposition from organised labour. From 2004 onward economic growth picked up signicantly; both employment and capital formation increased.[23]

In April 2009, amid fears that South Africa would soon join much of the rest of the world.

2.Employment
The unemployment rate is very high, at more than 25%, and the poor have limited access to economic opportunities and basic services. Poverty also remains a major problem. In 2002,according to one estimate, 62% of Black Africans, 29% of Coloureds, 11% of Asians, and 4% of Whites lived in poverty.
The high levels of unemployment and inequality are considered by the government and most South Africans to be the most salient economic problems facing the country. These issues, and others linked to them such as crime, have in turn hurt investment and growth, consequently having a negative feedback effect on employment. Crime is considered a major or very severe constraint on investment by 30% of enterprises in South Africa, putting crime among the four most frequently mentioned constraints.

Historical statistics

This is a chart of the trend of South Africa's gross domestic product at market prices estimated by the International Monetary Fund:

Year |GDP, US$ bln |US dollar exchange in early January |Unemployment rate |Per capita income, in US$ | |1980 |80.547 |0.8267 rand |9.2 |2764 | |1985 |57.273 |2.0052 Rand |15.5 |1736 | |1990 |111.998 |2.5419 Rand |18.8 |3039 | |1995 |151.117 |3.5486 Rand |16.7 |3684 | |2000 |132.964 |6.1188 Rand |25.6 |2986 | |2005 |246.956 |5.6497 Rand |26.7 |5267 | |2010 |363.655 |7.462 Rand |24.9 |7274 | |Natural resources

Mining has been the main driving force behind the history and development of Africa's most advanced and richest economy. Large-scale and profitable mining started with the discovery of a diamond on the banks of the Orange River in 1867 by Erasmus Jacobs and the subsequent discovery and exploitation of the Kimberley pipes a few years later. Gold rushes to Pilgrim's Rest and Barberton were precursors to the biggest discovery of all, the Main Reef/Main Reef Leader on Gerhardus Oosthuizen's farm Langlaagte, Portion C, in 1886, the Witwatersrand Gold Rush and the subsequent rapid development of the gold field there, the biggest of them all.

South Africa is one of the world's leading mining and mineral-processing countries. Though mining's contribution to the national GDP has fallen from 21% in 1970 to 6% in 2011, it still represents almost 60% of exports. The mining sector accounts for up to 9% of value added.

In 2008, South Africa's estimated share of world platinum production amounted to 77%; kyanite and other materials, 55%; chromium, 45%; palladium, 39%; vermiculite, 39%; vanadium, 38%;zirconium, 30%; manganese, 21%; rutile, 20%; ilmenite, 19%; gold, 11%; fluorspar, 6%; aluminium, 2%; antimony, 2%; iron ore, 2%; nickel, 2%; and phosphate rock, 1%. South Africa also accounted for nearly 5% of the world's polished diamond production by value. The country's estimated share of world reserves of platinum group metals amounted to 89%; hafnium, 46%;zirconium, 27%; vanadium, 23%; manganese, 19%; rutile, 18%; fluorspar, 18%; gold, 13%; phosphate rock, 10%; ilmenite, 9%; and nickel, 5%.It is also the world's third largest coal exporter.

The mining sector has a mix of privately owned and state-controlled mines, the latter including African Exploration Mining and Finance Corporation

Agriculture and food processing

The agricultural industry contributes around 10% of formal employment, relatively low compared to other parts of Africa, as well as providing work for casual labourers and contributing around 2.6% of GDP for the nation. However, due to the aridity of the land, only 13.5% can be used for crop production, and only 3% is considered high potential land. The sector continues to face problems, with increased foreign competition and crime being two of the major challenges for the industry. The government has been accused of either putting in too much effort, or not enough effort, to tackle the problem of farm attacks as opposed to other forms of violent crime.

According to FAOSTAT, South Africa is one of world's largest producers of: chicory roots (4th); grapefruit (4th); cereals (5th); green maize and maize (7th); castor oil seed (9th); pears (9th); sisal (10th); fibre crops (10th). In the first quarter of 2010, the agricultural sector earned export revenues for R10.1 billion and used R8.4 billion to pay for imported agricultural products, therefore earning a positive trade balance of R1.7 billion.

Manufacturing

The manufacturing industry's contribution to the economy is relatively small, providing just 13.3% of jobs and 15% of GDP. Labour costs are low, but not nearly as low as in most other emerging markets, and the cost of the transport, communications and general living is much higher.

The South African automotive industry accounts for about 10% of South Africa's manufacturing exports, contributes 7.5% to the country's GDP and employs around 36,000 people. Annual production in 2007 was 535,000 vehicles, out of a global production of 73 million units in the same year. Vehicle exports were in the region of 170,000 units in 2007, exported mainly to Japan (about 29% of the value of total exports), Australia (20%), the UK (12%) and the US (11%). South Africa also exported ZAR 30.3 billion worth of auto components in 2006

Trade and investment

Principal international trading partners of South Africa—besides other African countries—include Germany, the United States, China, Japan, the United Kingdom and Spain. Chief exports include corn, diamonds, fruits, gold, metals and minerals, sugar, and wool. Machinery and transportation equipment make up more than one-third of the value of the country's imports. Other imports include chemicals, manufactured goods, and petroleum.

Comparison with other emerging markets

South Africa compares well to other emerging markets on affordability and availability of capital, financial market sophistication, business tax rates and infrastructure, but fares poorly on the cost and availability of labour, education, and the use of technology and innovation.In a 2010 survey, South Africa was found to have the second most sophisticated financial market and the second-lowest effective business tax rate (business taxes as a percentage of company profits), out of 14 surveyed countries. The country was also ranked fourth for ease of accessing capital, fourth for cost of capital, sixth for its transport infrastructure (considered better than that of China, India, Mexico, Brazil and Poland, but behind that of Korea and Chile), and seventh for foreign direct investment as a percentage of GDP: in 2008 it was over 3% of the GDP. However, for availability of manual labour, South Africa is ranked last, and is also the only country of the 14 whose labour force shrunk in 2008 (by over 3%, compared to India, where the workforce grew by almost 3%). The cost of manual labour is ranked fifth out of 11 countries, at about the same level as South Korea, but more expensive than Brazil, India and China. South African factory workers are also better paid than those of Brazil, China, India, Poland and Mexico. South African workers are more productive than workers in Russia, Colombia, Brazil, China and India, but less productive than workers in Korea, Chile and Mexico. South Africa ranks poorly when it comes to education; only India fares worse when it comes to the percentage of matriculates moving onto higher education in 2007: in Brazil, 30% of matriculates graduated to tertiary institutions in 2007, and the figure was over 50% in Chile and over 90% in Korea, compared with just 15% in South Africa. This is despite the report ranking South Africa fourth for the percentage of GDP it spends on education (more than 4% in 2007). The report ranks South Africa 11th out of 14 countries when it comes to the country's use of technology and innovation, putting the African country behind Korea as well as the BRIC countries, but ahead of Colombia, Mexico and Argentina. Nevertheless, South Africa is falling behind other emerging markets, such as India and China, owing to several factors: the country is relatively small, without the advantage of a huge domestic customer base; it has had for decades an unusually low rate of saving and investment, partly because of political uncertainties; an inadequate education system results in an acute shortage of skilled manpower; a strong and volatile currency deters investors and makes its exports less competitive; the infrastructure, though far better than in the rest of Africa, suffers from severe bottlenecks, including power shortages, and urgently needs upgrading. In 2011, after a year of observer status, South Africa officially joined the BRICS group of now-five emerging-market nations at the summit held in sanya, Hainan, China.