dissertation on BRIC countries by ashish

ACKNOWLEDGEMENT

I express my sincere gratitude to my faculty guide Miss Deepmala Soni,

Lecturer in AIBS, for her able guidance, continuous support and

cooperation throughout my project, without which the present work

would not have been possible.

I would also like to thank the entire team Amity International Business

School for the constant support and help in the successful completion of

my project.

Signature

AMITY INTERNATIONAL BUSINESS SCHOOL,NOIDAAMITY INTERNATIONAL BUSINESS SCHOOL,NOIDAAMITY UNIVERSITY – UTTAR PRADESHAMITY UNIVERSITY – UTTAR PRADESH

TABLE OF CONTENTS

Subject

Chapter 1 Executive Summary 6

Chapter 2

Research Methodology……………… Primary Objective(s) Research Design Sample Design Scope of the Study

Limitations

7

Chapter 3 Critical Review of Literature 18

Chapter 4 Country Analysis 40

Chapter 5Data Collection

Primary Data Secondary Data

55

Chapter 6 Findings & Analysis 56

Chapter 7 Recommendations 58

Chapter 8 Bibliography 59

Chapter 9 Annexure

Tables Graphs

60

Chapter 10Conclusion

68

Chapter 11 80


EXECUTIVE SUMMARY

This research work - has been done by me under the humble guidance of my

Industry guide Mr ABAHY UPADHAY & faculty guide Ms.Geeta on the topic

“IMPACT OF FOREIGN INSTITUTIONAL INVESTMENT ON INDIAN

STOCK MARKET”.

This research work starts with the general introduction of the FII in India after

LPG(Liberalization ,Privatization , Globalization) in 1991 . Rules & regulation

through which FII enter into Indian market & finally what impact it leaves on our

sensex , also provides the advantage & disadvantage of FII in India .

Foreign Institutional Investors are in love with India. They are betting big time on

Dalal street. The amount of investment that has poured into India in last 3 Years is

more than total investment they made in the country since India got Independence .

The total investment that Foreign Investors (FIIs) have made in India currently

stands at 220,000 crore rupees or $52 Billion. These figures were as of April 2007. In

first 4 months of this year itself FIIs have put in around 15000 crores One of the

reason which pulls the Sensex to a life time high 15000,in July 2007 is none other

than FIIs only

With the use of SPSS, finally I find that positive relationship exist between FII &

SENSEX figure , as R2 ( coefficient of determination) comes out in plus points


RESEARCH METHODOLOGY

PRIMARY OBJECTIVE Before starting a project , we should keep in mind the clear objective of the project

because in the absence of the objective one can”t reach the conclusion or the end result of

the project . Research objective answer the question “Why this study is being conducted”

For every problem there is a research. As all the research is based on some objective, my

research has also some objectives which are as follows:

To ascertain the growth prospect in BRIC countries by doing in-depth and

detailed analysis of the economic situations in these countries

To identifying key opportunities for growth in different industry sectors at the

economies of Brazil Russia, India and China,


RESEARCH DESIGN

Research Design is a plan for selecting the sources and types of information used to

answer research questions. A framework for specifying the relationships among the

study variables. Research Design is a blueprint that outlines each procedure from

the hypothesis to the analysis.

Research Design is the conceptual structure within which research is conducted. It

constitutes the blueprint for collection, measurement, & analysis of the data. The

design used for carrying out this research is EXPLORATORY & EXPERIENCED

based.

This type of research is tentative and it is qualitative in nature. Exploration is

particularly useful when researchers lack a clear idea of the problems.

The approach used in the study was both qualitative as well as quantitative as only

theoretical aspects are not considered but their practicality is also been observed.


SCOPE OF THE STUDY Emerging Economic Powers

Increasing share of global GDP

Higher growth rate of GDP per capita

Burgeoning energy consumption

Growing Foreign Direct Investment


LIMITATIONChallenges facing BRIC economies

Problems of state functioning

Ineffective law and order

Rampant corruption

High levels of inequality and poverty

Growing Pains: Brazil, Russia, India and China face economic hurdles

Brazil, Russia, India and China, collectively known as BRICs, are the current buzz on

everyone’s global economy radio as a result of their incredible economic growth. This

growth has stemmed from compounding changes in each country: “All these things don’t

just happen magically–they happen for a reason,” says Texas A&M Finance Professor

Arvind Mahajan.

Mahajan, Lamar Savings Professor at Mays, is co-author of “A Future Global Economy

to be Built by BRICs,” published as the lead article in the May 2007 issue of Global

Finance Journal.

Researchers have linked BRICs as a potential team with China and India acting as

dominant global suppliers of goods and services, and Brazil and Russia as their

commodity and raw material suppliers. All four of these countries have experienced

growth because of their advancement to global capitalism, which has been propelled by

programs such as changing political systems, foreign investment and education. But

BRIC countries still face major hurdles that may slow their rising economies.

Brazil’s economic position has improved because the demand and prices of its exports

have risen, but primary surplus associated with higher taxes can lead to higher public

debt. The INSS, Brazil’s social security administration, is pressuring the central

government for increasing retirement expenditures while investment expenditures are

declining as a fraction of its gross domestic product, or GDP.


High oil prices and a cheap ruble are the sources of Russia’s recent economic success. Its

foreign debt has declined from 90 percent of GDP to only 31 percent and foreign reserves

have leaped from $12 billion to $180 billion within a decade. Russia has abundant natural

resources, but still faces problems because the country lacks strong legal, financial and

democratic institutions.

A democratically elected government runs India, but its democracy has created obstacles

of another kind. “Progress can’t be as swift because of democracy. Democracy can be

bad news and good news—it’s bad because it makes everything move slower, but it’s

good because if people aren’t happy, they can complain,” Mahajan says. Even with

slower progress, India’s growth rate has exploded–it averaged a 6 percent increase over

the last 25 years. If that growth rate continues, India’s economy (in terms of purchasing

power) will equal that of the U.S. by 2050.

China has the most potential of the BRIC countries to become the next world leader.

Mahajan says researchers joke that “China is the production center of the world and India

is the huge back office of the world.” China is the biggest country by area, and with 1.3

billion people, it is also the most populous nation in the world. Needless to say, China’s

overpopulation results in cheap labor and concentrated areas of poverty.

In an effort to control overpopulation, each family in China was allowed to have only one

child. This has helped lower the population, but in the future, there may not be enough of

the working-age population left to run China’s huge rising economy. The lack of

regulations is also causing major problems. Pollution is so extreme that citizens are

developing serious health problems from polluting agents. And as more people in China

become educated and wealthy, they will demand more political rights.

In order for the U.S. to remain active in the global market alongside BRIC countries,

Mahajan suggests that the U.S. must continue in the path of freely competitive and more

efficient markets, pursuing policies encouraging innovation and rigorous education with

new industry-specific strategies. “If we do things right, we can have the same strengths,”

he says.


Students at Mays Business School can expect more opportunities for study abroad

experiences, including those in BRIC countries. MBA students are studying in India this

year and other students will have the opportunity to study at the University of Beijing.

Mays faculty were also involved in starting a business school in St. Petersburg, Russia.

Mahajan, along with other Mays professors, plans to continue challenging Texas A&M

students in their knowledge and understanding of the global economy, especially

concerning BRIC countries. “The U.S. is on the first page of every country’s newspaper,”

Mahajan says. “We know so little about these countries, and they know so much about

us. We need to understand where people are coming from to know where they are going


CRITICAL REVIEW OF LITERATURE

BRIC or BRICs are terms used in economics to refer to the combination of Brazil,

Russia, India, and China. The fortunes of the world economy over the next decade

depend on what happens in the BRIC countries: Brazil, Russia, India and China. All with

large populations and hungry for growth, they are already reshaping global commerce

and they have the potential to change it even more. In this issue of The Banker we focus

on all four. With international banks engrossed by China, our cover story looks at the best

banks to buy and provides a Top 50 of Chinese banks.

The Bric countries have large, young populations to drive this growth, with many

concentrated in major cities, wealth generators that these are.The growing prosperity of

the Bric economies will be largely down to a rapidly emergent and expanding middle

class. Improving domestic consumption should complement export and investment

strengths, and provide more long-term growth.

The numbers of Bric residents whose incomes exceed $3,000 (consistent with entry into

the middle class in the emerging markets region) should almost double between 2006 and

2009.

By 2015, more than 800 million people across the four economies should have crossed

this threshold – exceeding the current total population of the US, Western Europe and

Japan combined. This should affect many industry sectors, including mobile-phone

operators, computers, automobiles, etc. Rising incomes will also lead to increased

numbers of high-net-worth individuals.

Another factor supporting these markets is corporate profitability. Corporate profits in

Bric companies has been consistently positive over the past decade, driven largely by

corporate restructuring, reduced levels of borrowing and improvements in the quality of

corporate governance.


http://www.thebanker.com/news/fullstory.php/aid/2795/Best_banks_to_buy_in_China.html

http://en.wikipedia.org/wiki/People's_Republic_of_China

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Russia

http://en.wikipedia.org/wiki/Brazil

In future, provided the recent problems in the credit market do not affect global growth in

a significant manner, we believe that Brazil should continue to perform well despite the

short-term volatility. Valuations are not stretched, and diversification has been increasing

with new companies coming to the market.

Meanwhile, India's stock market has reached very high levels. We expect Indian GDP

and corporate earnings growth to slow as we enter 2008. We will be watching for fiscal

and monetary policy initiatives to keep inflation under control. Although positively

positioned for the long term, the Indian market is likely to remain volatile in the short

term.

Chinese equity valuations have moved up in recent months, but we believe the higher

valuations are justified given the better earnings-growth outlook. The currency

appreciation, mergers and acquisitions, and implementation of management incentive

plans, as well as a tax cut in 2008, should support Chinese equities. A negative is China's

huge and rising trade surplus with the US and Europe.

Finally, Russian equities suffered in the August markets' turmoil, and with no strong

performance earlier this year to cushion the blow, many Russian stocks have been left on

modest valuations. For example, Gazprom and Lukoil are on relatively low valuations,

even though both companies have a longer estimated life of oil resources than their

Brazilian counterpart Petrobras.The oil price, which is a key driver of Russian equities, is

unlikely just to collapse, although for some stocks, the market has been trading as if this

were the case.


Forecasts that the nominal GDP of the BRICs will virtually treble between 2006-2012 to

US$15.4trn, with combined exports of US$3.6trn boosting domestic growth and creating

a whole new generation of consumers. At a time when growth is slowing in Europe and

the US, the BRICs are a uniquely compelling growth opportunity for companies able to

penetrate these largely virgin markets. The economies of China and India, whose recent

growth has been triggered by investment and exports of manufactured goods, are

vastly different from resource-fuelled Russia and, to a lesser extent, Brazil.

Consequently, any strategy to exploit the growth of the BRICs must take into account

the unique risks faced in each - for example, the dangers to oil price stability for

Russia, and the immaturity of financial markets and inflationary pressures for China.

B razil , R ussia , I ndia , and C hina in 2050.Some Projection about BRIC countries

In less than 40 years, the BRICs economies together could be larger than the G6 in US$

terms .By 2025 they could account for over half the size of the G6 - they are currently

worth less than 15%. Of the current G6, only the US and Japan may be among the six

largest economies in US$ terms in 2050

The largest economies in the world (by GDP) may no longer be the richest (by income

per capita), making strategic choices for firms more complex.

As today’s advanced economies become a shrinking part of the world economy, the

accompanying shifts in spending could provide significant opportunities for global

companies. Being invested in and involved in the right markets—particularly the right

emerging markets—may become an increasingly important strategic choice

Brazil, Russia, India and China as economies that would together overtake the economies

of the six richest countries in the world by 2040. India and China are investing in higher

education and going for “intellectual capital”, while Russia and Brazil depend too much

on the current commodity price boom and are not making the necessary investments in

infrastructure and human capital.


http://en.wikipedia.org/wiki/People's_Republic_of_China

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Russia

http://en.wikipedia.org/wiki/Brazil

Russia currently has a bad reputation for obvious very serious political reasons, and

Brazil tends to get lost in the meanders of its democratic politics and corruption scandals.

However, in my view, the article goes a bit too rapidly over a few issues. So, here a few

remarks, if I may:

According to the authors, China and India “are competing with the west for

“intellectual capital” by seeking to build top-notch universities, investing in high,

value-added and technologically intensive industries, and utilising successful

diasporas to generate entrepreneurial activity…”. Yes, but India has got its basic

education wrong. It might have a few Brahmin-like intellectuals involved in rich-

economy standard services and high-tech activities, but it will not have resolved

its problems of mass poverty and thus long-term political stability and immense

potential growth prospects. According to my Pocket World in Figures, 2007

Edition edited by The Economist, adult literacy in China is 90.9%, Brazil 88.6%,

Russia 99,4% and India…. a mere 61%. What do foreign investors want to do in a

country with 40% illiterate people? There is not much evidence either that much

is being done in India to tackle this problem.

The article also says that in Russia and Brazil, “the infrastructures of both

countries remain third world”. If China is investing massively in infrastructure,

there is no evidence of a real drive to do something about infrastructure in India at

all. And if Brazil’s and Russia’s infrastructure is “third world”, so what is India’s?


FACTORS LEAD TO GROWTH IN BRIC countries

Globalization and growth--Worldwide demand for energy and other commodities, the

outsourcing phenomenon, and widespread access to global capital have helped fuel the

BRIC countries' growth. India dominates service outsourcing, Brazil and Russia have

vast energy and mineral resources, and China has developed into the world's

manufacturing plant. India's economy is growing at 8.5% a year, and China's at more

than 10.5%, and a combined GDP of BRIC countries is US$5.2 trillion in 2006.

Huge populations, future buyers--Together, the BRIC countries represent 42% of the

world's population, These leading emerging and rapidly-growing economies represented

a total market of 2.7 billion people.That number represents enormous untapped future

purchasing power. It gives BRIC countries the potential for even more rapid expansion if

their economies continue

to develop and the benefits reach a greater percentage of their populations.

Reduced reliance on foreign debt—Growth has helped BRIC countries pay down loans

incurred during previous economic crises, though the potential for default on that debt

could still present an investment risk.

Riding the roller coaster


Despite the recent success of these regions--or because of it--money managers are

divided on how long the rise of emerging markets can continue without a significant

correction. Because commodities are so important to the BRIC economies, any slowdown

in worldwide growth and therefore demand could have a significant impact on

investments there. Other risks exist as well. All four countries have experienced political

instability, currency fluctuations, and/or economic problems. Investors who were affected

won't soon forget Russia's 1998 economic crisis or Brazil's bouts with rampant inflation

in the late 1980s and early 1990s. Also, economic growth rates don't necessarily translate

directly into stock market returns; until the last year or so, China's stock market suffered

serious multiyear losses.

BRIC investing and beyond

You have many ways to take advantage of the projected growth in these regions. One of

the most popular is index mutual funds or exchange-traded funds (ETFs), which may be

based on an index for an individual country or one that's BRIC-wide. You might also

want to explore beyond the BRICs. Other emerging markets might have great growth

potential but might not yet have attracted as much investor attention. Diversified

emerging-markets funds often have a large exposure to the BRIC countries. The number

of BRIC-specific companies

is relatively limited; including other emerging markets as well as the BRICs gives a fund

manager an expanded universe of securities from which to select. If you're interested in

individual stocks, some of the largest BRIC firms are listed on U.S. exchanges via

American Depositary Receipts (ADRs). The historical volatility of emerging markets

means you should take a long-term view, and be prepared for the possibility of ups and

downs along the way. Your financial professional can help you decide whether emerging

markets are appropriate for part of your portfolio, and suggest how to balance their

potential rewards and risks.

COUNTRY ANALYSIS


BRAZILBrazil became an independent nation in 1822 and a republic in 1889. By far the largest

and most populous country in South America, Brazil overcame more than half a century

of military intervention in the governance of the country when in 1985 the military

regime peacefully ceded power to civilian rulers. Brazil continues to pursue industrial

and agricultural growth and development of its interior. Exploiting vast natural resources

and a large labor pool, it is today South America's leading economic power and a

regional leader. Highly unequal income distribution remains a pressing problem.

Population: 190,010,647

Brazil conducted a census in August 2000, which reported a population of 169,799,170;

that figure was about 3.3% lower than projections by the US Census Bureau, and is close

to the implied under enumeration of 4.6% for the 1991 census; estimates for this country

explicitly take into account the effects of excess mortality due to AIDS; this can result in

lower life expectancy, higher infant mortality and death rates, lower population and

growth rates, and changes in the distribution of population by age and sex than would

otherwise be expected .

Age structure: 0-14 years: 25.3% (male 24,554,254/female 23,613,027)

15-64 years: 68.4% (male 64,437,140/female 65,523,447)

65 years and over: 6.3% (male 4,880,562/female 7,002,217)

Median age: total: 28.6 years

male: 27.9 years

female: 29.4 years

Population growth rate: 1.008%

Birth rate :6.3 births/1,000 population.

Death rate: 6.19 deaths/1,000 population


Sex ratio: at birth: 1.05 male(s)/female

under 15 years: 1.04 male(s)/female

15-64 years: 0.983 male(s)/female

65 years and over: 0.697 male(s)/female

total population: 0.976 male(s)/female

Life expectancy at birth: total population: 72.24 years

male: 68.3 years

female: 76.38 years

Nationality: Brazilian

Ethnic groups: white 53.7%, mulatto (mixed white and black) 38.5%, black 6.2%,

Religions: Roman Catholic (nominal) 73.6%, Protestant 15.4%, Spiritualist 1.3%,

Bantu/voodoo 0.3%, other 1.8%, unspecified 0.2%, none 7.4% (2000 census)

Languages: Portuguese (official), Spanish, English, French

Brazil will remain a strong beneficiary of high energy prices in 2008, with its ethanol and

chemical industries firing on all cylinders. Brazil is also strongly positioned in the world

of rising beef and poultry prices, general appreciation in agricultural commodities

markets and rising global demand for other natural resources. It’s regional stronghold in

energy will be amplified as electricity demand rises both domestically and in

neighbouring countries.

Brazil is benefiting from benign inflation and strong exports. In addition, declining

interest rates and a current account surplus have combined to kick-start local markets.

Brazil's growth is expected to remain strong as homebuilding takes off, retail sales

expand and infrastructure improvements gain steam. All of this comes as exports remain

healthy and demand for imports rises.


RUSSIA

Founded in the 12th century, the Principality of Muscovy, was able to emerge from over

200 years of Mongol domination (13th-15th centuries) and to gradually conquer and

absorb surrounding principalities. In the early 17th century, a new Romanov Dynasty

continued this policy of expansion across Siberia to the Pacific. Under PETER I (ruled

1682-1725), hegemony was extended to the Baltic Sea and the country was renamed the

Russian Empire. During the 19th century, more territorial acquisitions were made in

Europe and Asia. Defeat in the Russo-Japanese War of 1904-05 contributed to the

Revolution of 1905, which resulted in the formation of a parliament and other reforms.

Repeated devastating defeats of the Russian army in World War I led to widespread

rioting in the major cities of the Russian Empire and to the overthrow in 1917 of the

imperial household. The Communists under Vladimir LENIN seized power soon after

and formed the USSR. The brutal rule of Iosif STALIN (1928-53) strengthened

Communist rule and Russian dominance of the Soviet Union at a cost of tens of millions

of lives. The Soviet economy and society stagnated in the following decades until

General Secretary Mikhail GORBACHEV (1985-91) introduced glasnost (openness) and

perestroika (restructuring) in an attempt to modernize Communism, but his initiatives

inadvertently released forces that by December 1991 splintered the USSR into Russia and

14 other independent republics. Since then, Russia has struggled in its efforts to build a

democratic political system and market economy to replace the social, political, and

economic controls of the Communist period. In tandem with its prudent management of

Russia?s windfall energy wealth, which has helped the country rebound from the

economic collapse of the 1990?s, the Kremlin in recent years has overseen a

recentralization of power that has undermined democratic institutions. Russia has

severely disabled the Chechen rebel movement, although violence still occurs throughout

the North Caucasus.


Population: 141,377,752





male: 35 years

female: 41.3 years

Population growth rate: -0.484%

Birth rate: 10.92 births/1,000 population








male: 59.12 years

female: 73.03 years

Nationality: Russian

Ethnic groups: Russian 79.8%, Tatar 3.8%, Ukrainian 2%, Bashkir 1.2%, Chuvash

1.1%, other or unspecified 12.1%

Religions: Russian Orthodox 15-20%, Muslim 10-15%, other Christian 2% (2006 est.)

Languages: Russian, many minority languages.


Russia will most likely be a star performer in 2008 in the entire Euro-Asian zone. This

performance will only partially depend on high-energy prices. Instead of oil and gas –

which will remain solid performers for Russia – the country economy will be driven by

domestic consumption growth, higher demand for majour commodities and enhanced

political stability. With March Presidential elections now looking increasingly less

uncertain and with Medvedev-Putin leadership team almost all but assured continuity into

2008-2012 term, Russian internal economic policies will be focusing on fostering greater

private sector development in key high technology, R&D, education, health services,

precision instruments, ICT and chemical sectors – all sectors with low level of market

power concentration, lack of monopolies and low state interference.

Russia faces political risk and depends heavily on oil and gas prices, but it's generally

considered the cheapest of the BRIC markets. Moreover, Russia has better long-term

growth prospects than most other emerging markets, Gerhardt says, and should

outperform in the next 12 months.

CHINA


China stood as a leading civilization, outpacing the rest of the world in the arts and

sciences, but in the 19th and early 20th centuries, the country was beset by civil unrest,

major famines, military defeats, and foreign occupation. After World War II, the

Communists under MAO Zedong established an autocratic socialist system that, while

ensuring China's sovereignty, imposed strict controls over everyday life and cost the lives

of tens of millions of people. After 1978, his successor DENG Xiaoping and other leaders

focused on market-oriented economic development and by 2000 output had quadrupled.

For much of the population, living standards have improved dramatically and the room

for personal choice has expanded, yet political controls remain tight.

Population: 1,321,851,888



65 years and over: 7.9% (male 49,683,856/female 54,356,900) (2007 est.)


male: 32.7 years

female: 33.7 years



Death rate: 7 deaths/1,000 population







male: 71.13 years

female: 74.82 years


Nationality: Chinese

Ethnic groups: Han Chinese 91.9%, Zhuang, Uygur, Hui, Yi, Tibetan, Miao, Manchu,

Mongol, Buyi, Korean, and other nationalities 8.1%

Religions: Daoist (Taoist), Buddhist, Christian 3%-4%, Muslim 1%-2%

note: officially atheist

Languages: Standard Chinese or Mandarin (Putonghua, based on the Beijing dialect),

Yue (Cantonese), Wu (Shanghainese), Minbei (Fuzhou), Minnan (Hokkien-Taiwanese),

Xiang, Gan, Hakka dialects, minority languages (see Ethnic groups entry)

INDIA


Aryan tribes from the northwest infiltrated onto the Indian subcontinent about 1500 B.C.;

their merger with the earlier Dravidian inhabitants created the classical Indian culture.

The Maurya Empire of the 4th and 3rd centuries B.C. - which reached its zenith under

ASHOKA - united much of South Asia. The Golden Age ushered in by the Gupta

dynasty (4th to 6th centuries A.D.) saw a flowering of Indian science, art, and culture.

Arab incursions starting in the 8th century and Turkic in the 12th were followed by those

of European traders, beginning in the late 15th century. By the 19th century, Britain had

assumed political control of virtually all Indian lands. Indian armed forces in the British

army played a vital role in both World Wars. Nonviolent resistance to British colonialism

led by Mohandas GANDHI and Jawaharlal NEHRU brought independence in 1947. The

subcontinent was divided into the secular state of India and the smaller Muslim state of

Pakistan. A third war between the two countries in 1971 resulted in East Pakistan

becoming the separate nation of Bangladesh. India's nuclear weapons testing in 1998

caused Pakistan to conduct its own tests that same year. The dispute between the

countries over the state of Kashmir is ongoing, but discussions and confidence-building

measures have led to decreased tensions since 2002. Despite impressive gains in

economic investment and output, India faces pressing problems such as significant

overpopulation, environmental degradation, extensive poverty, and ethnic and religious

strife.

Population: 1,129,866,154

Age structure : 0-14 years: 31.8% (male 188,208,196/female 171,356,024)



Median age : total: 24.8 years

male: 24.5 years

female: 25.2 years











male: 66.28 years

female: 71.17 years

Nationality: Indian

Ethnic groups: Indo-Aryan 72%, Dravidian 25%, Mongoloid and other 3%

Religions: Hindu 80.5%, Muslim 13.4%, Christian 2.3%, Sikh 1.9%, other 1.8%,

unspecified 0.1%

Languages: English enjoys associate status but is the most important language for

national, political, and commercial communication; Hindi is the national language and

primary tongue of 30% of the people; there are 21 other official languages: Assamese,

Bengali, Bodo, Dogri, Gujarati, Kannada, Kashmiri, Konkani, Maithili, Malayalam,

Manipuri, Marathi, Nepali, Oriya, Punjabi, Sanscrit, Santhali, Sindhi, Tamil, Telugu, and

Urdu; Hindustani is a popular variant of Hindi/Urdu spoken widely throughout northern

India but is not an official language

PESTLE Analysis


Brazil: After the slowdown of the 90's the focus

shifts to stabilityThe current government's sustainability rests on its ability to widen the benefits of

reforms. After a fragile victory the current coalition looks stable .he general focus of the

government to be more pro-poor. Brazil continues to strive for a global recognition.

Lula's government needs to balance social objectives with economic reforms.

Though hindered by certain structural problems, economic growth now looks steady.

Brazil's economic performance has a strong base. Brazil seems to have left its turbulent

economic past behind though a number of basic issues still remain. A strict taxation

policy is regarded as a burden amongst all social classes with inadequate social returns

Despite government intervention, income disparities, poverty and regional

imbalances remain high While the overall situation remains far from ideal, the

government has tried to address this head on.Despite attempts to develop a solid social

infrastructure base, facilities remain inadequate. Income inequality and landlessness are

severe issues that still affect an overwhelming part of the population.

Investment in technological infrastructure in key industries is being used as the

main driver of industrial production. Investment in harnessing new technologies,

especially from the US, has contributed largely to the development of technology

intensive industries. The development of media and communications related

infrastructure and a skilled labor force to maintain this has taken place rapidly over the

past two decades

President Lula has promised to bring the issues of rampant red tape, corruption

and organized crime under control Corruption scandals involving members of the

legal, executive and judiciary systems are commonplace. Red tape is holding back

opportunities for business in Brazil. The existence of organized crime and prison gangs is


rampant. The absence of strong laws protecting intellectual property is a growing issue.

The Lula government has identified key issues to tackle.

New policies in place to control depletion of the rainforest and over-exploitation of

natural resources The government is taking action to control the environmental

degradation that has occurred over the past few years. Industrial progress had also had

significant environmental cost

Russia: Re-centralization and a revival driven by natural resources

Political stability is being achieved at the expense of democratic fundamentals

President Vladimir Putin has emerged as a dominant force in Russian politics and this is

likely to continue. New Russia's foreign policy stance is driven more by economic factors

rather than political and military factors. Despite Russia's forceful intervention, the

Chechnya issue continues to pose a threat to internal security

Natural resources based growth is being diversified by encouraging foreign

investment on a selective basis The Russian economy's strong growth is driven by

continuous expansion in internal demand, growing capital investment, high oil prices and

a relatively cheap ruble

Though there is a movement towards greater economic control, the government

recognizes foreign investment as an important driver of economic development.

A declining and ageing population along with the growth of urban agglomerations

are increasingly important issues. Russia's population is steadily declining and ageing

rapidly Expanding urban agglomerations are characterized by rising affluence and

growing business opportunities but income inequality and a rising crime rate are the key

challenges

Active government involvement to support the growth of the ICT sector, though

software piracy is still rampant The Russian government is actively encouraging


research and development in the technology sector.Software Piracy continues to be a

major inhibitor to the growth of the ICT industry

Development of an investor-friendly climate faces obstacles of corruption and

organized crime. Russia has created flexible and investor friendly laws which are

helping in realizing high economic growth rates. Centralization of power in the

presidency has adversely affected judicial independence and legal function. The

government must make a concerted effort to eliminate rampant criminal activity.

Economic progress is taking priority over environmental concerns Economic

development has taken a priority over environmental sustenance Russia's vast network of

oil pipelines and nuclear waste disposal system need urgent upgrading and maintenance.

Global warming is becoming an important issue

India: Rising internal issues may de-stabalize the well placed reforms

Declining in influence, Indian National Congress still holds the key to political stability

Gaining the support of national and regional parties makes it difficult for a single-party

government to be formed at the center. Political stability in India is threatened by the

Kashmir dispute and other internal issues. India's current position in the global arena is

reflective of its political and economic development over the past two decades.

Doubts over sustainability of the current rapid economic growth continues to plague

the sub-continent India has registered robust economic growth over the recent past

which has put it in a relatively strong economic position. However, doubts over the

sustainability of this growth continue to plague the economy. Infrastructure holds the key

to sustain current levels of economic growth. The government has adopted a liberal

approach towards foreign nvestment in most sectors

Recent economic development raises new social issues

Changing social and demographic make-up of the economy is presenting new

opportunities as well as challenges Social dimensions of poverty and inequality need to


be tackled along side economic development The social infrastructure in place is not

sufficient to meet the needs of a burgeoning population

India registers an increasing technological presence globally

Large talent pools, the development of required infrastructure and incentives provided by

state governments are attracting investment in the ICT sector. There is evidence of

increasing technological capability and learning among Indian firms. A growing number

of MNC's have been setting up offshore development centers and R&D facilities in India

since the 1990s. Despite the impressive performance, there is a huge scope for

improvement in the software sector.

Steps have been taken to improve the legal system though lot still remains

Initiatives have been taken to strengthen the judicial system. Other indicators of legal

health see only marginal improvement

Environmental concerns remain buried under economic and social problems

Polluting industries and agents yet to be checked. The supply of water for direct

consumption, irrigation purposes and commercial purposes still remains an issue

Demographic and economic changes bring new dimensions to environmental concerns.

China: Emerging challenges shift focus away from economic growth

China continues to be ruled in a strong, authoritarian manner However, in order to adapt

itself to the changing economic and social environment, the CCP has created a variety of

new political institutions to provide a bridge between state and society With rapid

privatization of the economy, a variety of business and trade associations have been

created, largely in the coastal regions, and are having an increased influence of those

outside the formal party structure.In the international arena, China is emerging as an

active player. This aspiration is evident in its less confrontational and more constructive

approach towards regional and global affairs.


After two decades of rapid economic growth, China takes conscious measures to

stabilize and sustain future growth. China has been the fastest growing economy in

East Asia and the world for the last two decades However; there are growing concerns

about the sustainability of the continuous high growth rates Steps to cool the economy

might prove ineffective. China still continues to protect its economy

China's demographic transition to an ageing population and growing inequality

poses serious economic challenges A major demographic issue facing China is its

ageing population. Increasing inequality is emerging as an issue in China

The Chinese economy is witnessing a technological shift . Historically China focused on

low cost bulk manufacturing and placed little emphasis on branding but recently there has

been a growing shift towards use of high-end technologies and brand creation. China is

attempting to create its own technological standards. There is strong political control of

the judiciary. Freedom of the press and religion has been severely restricted. Although

Intellectual Property Laws have been strengthened, significant progress needs to be made

in the implementation of these laws

The Increasing environmental cost of expansion has forced the government to

become more environment friendly Centralized policy making combined with a high

degree of emphasis on economic growth has resulted in China becoming one of the

largest global polluter .

IT SECTOR

Brazil, Russia, India and China to Lead Internet Growth Through 2011


There will be 1.5 billion people with Internet access in 2011, with the biggest growth in

the online population occurring in Brazil, Russia, India and China, according to a new

report.

In its "Worldwide Online Population Forecast, 2006 to 2011," JupiterResearch anticipates

that a 38 percent increase in the number of people with online access will mean that, by

2011, 22 percent of the Earth's population will surf the Internet regularly.

JupiterResearch says the worldwide online population will increase at a compound

annual growth rate of 6.6 percent during the next five years, far outpacing the 1.1 percent

compound annual growth rate for the planet's population as a whole. The report says 1.1

billion people currently enjoy regular access to the Web.

North America will remain on top in terms of the number of people with online access.

According to JupiterResearch, online penetration rates on the continent will increase from

the current 70 percent of the overall North American population to 76 percent by 2011.

However, Internet adoption has "matured," and its adoption pace has slowed, in more

developed countries including the United States, Canada, Japan and much of Western

Europe, notes the report.

As the online population of the United States and Canada grows by about only 3 percent,

explosive adoption rates in China and India will take place, says JupiterResearch. The

report says China should reach an online penetration rate of 17 percent by 2011 and India

should hit 7 percent during the same time frame. This growth is directly related to

infrastructure development and increased consumer purchasing power, notes

JupiterResearch.

By 2011, Asians will make up about 42 percent of the world's population with regular

Internet access, 5 percent more than today, says the study.

Penetration levels similar to North America's are found in Scandinavia and bigger


Western European nations such as England and Germany, but JupiterResearch says a

number of Central Europe countries "are relative Internet laggards."

Brazil "with its soaring economy," is predicted by JupiterResearch to experience a 9

percent compound annual growth rate, the fastest in Latin America, but China and India

are likely to do the most to boost the world's online penetration in the near future.

For the study, JupiterResearch defined "online users" as people who regularly access the

Internet by "dedicated Internet access" devices. Those devices do not include cell phones.

Brazil, Russia, India and China, commonly referred to as BRIC, consumed $65 billion of

information technology in 2005 and combined IT spending in BRIC is expected to reach

nearly $110 billion by 2009. Although they are often described as a group, Brazil, Russia,

India, and China are a diverse and complex set of economies and cultures. Today these

economies account for just 6% of global IT consumption, but by 2009 the BRIC

emerging group will account for 8% of global technology spending, making it equal in

size to the Japanese IT market. This is this reason why BRIC is becoming an important

strategic focus for many global technology companies.

Monitoring developments in technology markets in these countries is a difficult and time-

consuming task. IDC has over 110 employees in the BRIC countries, and its broad

research coverage is designed to meet the tactical needs of country sales and marketing

managers as well as the more strategic requirements of regional and global executives.

Energy Sector


The BRIC countries - Brazil, Russia, India and China - have helped push the steel

demand globally with strong performances recorded in the past year and is expected

to sustain in coming years too.

The International Iron and Steel Institute (IISI) said that with only two months left before

the year gets over, the expectation for global demand in alloy for 2007 is to increase 6.8%

due to solid contribution given by BRIC countries - Brazil, Russia, India and China,

reported.41% of the worldwide steel demand in the year 2006 came from the BRIC

countries and a forecast by IISI expects them to lead the consumption growth by around

12.7% in the year 2007 and over 11% in 2008.

Apparent consumption of steel in China is anticipated to increase by 11% this year and

over 11.3% in 2008, making up 35.01% of the worldwide demand for two years time. For

India, consumption of steel is expected to grow by 13.5% this year and around 11.6% in

the year 2008.

Positive predictions are being made for Russia's market, following an increase of 25% in

consumption for the year 2007 and a rise of around 9.48% for 2008. The rise is being

fuelled by the construction and energy sectors. Brazil's apparent consumption of steel is

projected to go up by 15.60% this year and 5% in the year 2008, with public investment

program partly contributing to fixed capital formation.

The surging steel demand will benefit the iron-ore diggers the most, and steel producers

of coking (metallurgical) coal. Manganese and molybdenum are also going to benefit but

for stainless steel, the demand for chrome and nickel will remain underpinned.

In a statement published by Resource Investor, John Surma, IISI's Chairman said,

"Besides BRIC countries we are pleased to note that North Africa, South Africa and the

Middle East are emerging as strong growth regions, as higher energy and raw material

prices associated with growth in China, as well as other developing nations, increase

incomes and boost investment in these regions."


http://www.resourceinvestor.com/

A research analyst at RNCOS says convincingly, "The economic boom in developing

parts like the BRIC countries of Brazil, Russia, India and China has increased the steel

demand and its price. The demand for steel is boosted due to infrastructure development,

like construction of roads, buildings and bridges, in these countries. Prospering

economies also means wealthy citizens, who are demanding for autos and consumer

goods that contain steel."

Brazil, Russia, India and China, also known as the BRIC group of countries, are expected

to overtake the rich countries in primary energy consumption by 2030 and worsen their

environmental calamities, Paris-based Organisation for Economic Cooperation and

Development (OECD) has warned.

Issuing the 2008 OECD Environmental Outlook the rich country economic thinktank

said “the primary energy consumption of Brazil, Russia, India and China together is

expected to grow by 72 per cent between 2005 and 2030, compared with 29 per cent in

the OECD countries.”

Unless ambitious policy action is taken, greenhouse gas emissions from just these

four countries will grow by 46 per cent in 2030, surpassing those of the 30 OECD

countries combined,” it warned, maintaining that people in the BRIC countries are

already facing many environmental problems.

The Market for Pharmaceuticals in

Brazil, Russia, India & China 2008The BRIC countries’ pharmaceutical markets are currently valued at US$54.9 billion.

This is a large sum of money, but is collectively lower than found in leading markets

such as the USA and Japan. Growth rates, ranging from 5% in Brazil to 15% in Russia


http://www.rncos.com/

are impressive, but the low starting point – along with a range of other operational issues

– means companies must be targeted in the opportunities they pursue.

Opportunities do exist

There are, of course, wide regional differences in expenditure levels within the BRIC

countries, far more so than in developed countries where health systems have evolved to

provide a more uniform level of coverage. All four countries have a relatively wealthy

urban population with a far greater spending power than their respective national average.

In the case of China and India, these urban populations have grown rapidly, and number

hundreds of millions. The challenge for these countries is to extend this level of wealth to

the rest of the population, in order that better levels of healthcare become affordable.

A long haul

This is evolution not revolution, and change will be incremental. Short-term opportunities

exist in meeting the health demands of the burgeoning middle classes, and future

prospects are bright, where steady growth in BRIC markets will erode commercial

differences with the established markets in North America, Japan and Europe.

Current and accurate decision support information is vital

Effective planning is vital and that is why Espicom, the leading provider of

pharmaceutical market intelligence, has issued this report collection The Market for

Pharmaceuticals in Brazil, Russia, India & China 2008. For each country there is a

comprehensive examination of the market for pharmaceuticals which covers all aspects

of the operating environment from the regulatory situation through health

provision/expenditure to domestic production. Importantly, each market evaluation

includes 5-year growth forecasts and SWOT analysis. An additional benefit - at no extra

cost – is that concise quarterly-updated outlook reports are included in the price.

INDIA

With a population of over one billion, the pharmaceutical market in India has


considerable potential. Espicom’s market projections assume stable market growth of

around 8.4% per year, putting the market at US$15.6 billion by 2012. It should be noted,

however, that if calls for an end to drug price controls come to fruition, short-term market

growth is likely to be much higher.

As India develops, the disease profile of the country is changing. Traditional infectious

diseases such as smallpox have been eradicated and the number of cases of vaccine

preventable conditions has also been greatly reduced. Along with life expectancy,

however, the prevalence of western style diseases has been increasing. There are around

700,000 new cases of cancer each year and a total of around 2.5 million cases. Around

two thirds of cases are in an advanced stage at the time of detection. The majority of

these are smoking related cancers.

CHINA

The pharmaceutical market in China (excluding Hong Kong) is estimated at US$22.6

billion in 2007, an increase of around 8.5% over the previous year. The figure is

distorted, however, by the presence of traditional Chinese medicines (TCMs). The TCM

market is estimated to be worth around US$5-6 billion. The size of the market for

western-style pharmaceuticals, therefore, can be reckoned at around US$17.0 billion,

equal to around US$13 per capita. This makes China one of the largest markets in the

world, and second only to Japan in Asia. Per capita spending on pharmaceuticals remains

among the lowest in the world, however, and is broadly comparable with India.

The Chinese pharmaceutical market has shown impressive growth in recent years, in

tandem with the country’s rapid economic expansion. The influx of foreign

multinationals in recent years has offered continued investment, and production plants

and R&D facilities are being expanded all the time. Improvements in regulatory practices

are making the ability to sell imported products quicker and easier, while the lowering of

tariffs on imported goods and an increase in transparency of legislation has made a

notoriously hard-to-penetrate market a more attractive proposition for overseas

companies. Imports continue to rise, with 2005 seeing an increase of 21.8%. Recent


government price cuts, particularly pertaining to the burgeoning category of antibiotics

are likely to affect some companies, and although an anticipated price war is likely to

have an effect on the market, the industry as a whole will become more competitive.

BRAZIL

Due to the depreciation of the US dollar, the Brazilian pharmaceutical market is

experiencing high growth in dollar values. The Brazilian pharmacy sector was valued at

US$9.8 billion in 2006, well ahead of the pharmacy sector in Mexico, valued at US$9.6

billion. Drug prices continue to increase in spite of generics competition. Excluding

ICMS and other taxes applicable to drugs, FEBRAFARMA estimated the annual

pharmaceutical market at US$10.9 billion and 1.7 billion units in 2006. Including ICMS

and other taxes, Espicom estimates the market to reach around US$13.6 billion in 2007,

equal to US$72 per capita.

The generics sector is dominated by local producers, restricting the market entry for

foreign producers. In 2006, generics sales amounted to US$1.1 billion, equal to 10.7% of

the overall pharmacy sector. Generics sales will continue to outperform the pharmacy

sector, fuelled by generics production of oral contraceptives & hormones and

blockbusters losing their patents.

RUSSIA

In 2007, the Russian pharmaceutical market is estimated at US$8.3 billion, equal to

around US$59 per capita. The market size is almost three times larger than the Czech

Republic. In per capita terms, the market is similar to Romania. The market is split

between imported products and cheap locally-produced generics. Imports account for

around 69% of the pharmaceutical market. According to the Ministry of Health and

Social Development, approximately 60% of imported drugs were generics in 2006.


In 2005, new rules governing the supply of drugs to vulnerable population groups came

into force. Patients have to choose between receiving a package of benefits including free

medicines or accepting a sum of R513 each month. The government initially allocated

US$1.7 billion for the programme, but this fell by 41% in 2006, due to half of the

population opting out in favour of the cash equivalent. The budget for 2007 is R34.9

billion (US$1.3 billion), although this is unlikely to cover costs.

Auto industry growth to come from BRIC countries:

The biggest breakthrough growth for the automotive industry will come from BRIC

countries .These countries — India, Brazil, Russia and China — will account for more

than 40 per cent of forecast global light vehicle assembly increases and represent 52 per

cent of the industry's forecast global capacity expansion.


These factors are reflected in the fact that nearly all major global automakers are pursuing

a BRIC strategy in some form as they attempt to gain competitive advantage by tapping

the potential of these emerging markets. This is just one of the findings included in the

annual `Global Automotive Financial Review' by PricewaterhouseCoopers.

According to Mr Ramesh Rajan, Automotive Industry Leader, PwC, "The Indian

automotive manufacturing sector is poised to grow, with increasing domestic market and

India being projected as the `hub' for small cars. Unveiling of the Tata Nano—and the

hysterical response it triggered off in India and overseas—the ultra low cost car is right

on top of the automotive mind-space . So much so that analysts and experts attending the

Detroit auto show just after the Delhi Auto Expo were amazed to see that the car that

made the most news there was the one that wasn’t even on show — namely the Nano.

Tata Nano sets the platform for India as a frugal engineering hub

So far we know pretty much every scrap of information that is avail-able on the Nano, till

the car is officially launched later this year and is available for test-drives . We know that

the standard variant — sans airconditioning and power steering—will have an ex-dealer

price of Rs 1 lakh (though customers will have to shell out the value added tax and the

logistics cost from the factory). That it sports a 623 cc, two-cylinder , MPFI engine with

single balancer shart, four-speed manual transmission and top speed of 105 kms per hour.

That the powertrain is packed in the rear to increase interior space.

All the major global vehicle manufacturers have either established or are in the process of

establishing their presence in India like Volkswagen, Hyundai Motors India,,

BMW,Nissan,Honda,Maruti.Tata Motors, Ford,Opel India, Renault, Toyota

etc. Industry, however, needs to work with Government to address some of the key

areas such as inadequate infrastructure, high direct and indirect tax regime, inflexible

labour laws, etc., to ensure that the industry is able to seize the opportunity and achieve

the potential growth."


As per the report, the emerging strength of the BRIC countries is common to all

manufacturing sectors. What makes the automotive industry so different is the additional

dynamics of consumer tastes and demands, which vary so much from market to market.

The challenge is responding to these with new strategies and products. Companies that

maintain a `business as usual' strategy or wait too long to act will find it extremely

challenging to sustain momentum as the competitive environment transforms around

them. As the auto industry becomes more global and markets more competitive, the

winners will tend to be those companies that fully capitalise on the opportunities in

BRIC Countries unique positioning in the Retail Market

As retail opportunities in emerging markets go, the undoubted leaders are the BRIC

nations of Brazil, Russia, India and China. Not only are these countries outrunning the

developed world with their slew of economic reforms, but they have also managed to stay

ahead of other emerging markets with their already sizeable retail markets. And


considering the saturated markets of the developed economies, the global investor can ill-

afford to ignore the growth of organised retail in these countries.

In India, the Retail sector is the second largest employer, after Agriculture. Growth of the

Russian retail market has also seen impressive. This unprecedented growth is due mainly

to the fact that the Organised retail markets in these countries are still in an infancy stage

but are growing very fast. BRIC markets are in general fragmented with a large number

of private owners and neighbourhood ‘mom & pop' stores. Therefore, as disposable

income rises in these countries, aided by second stage economic reforms, an increasing

trend towards urbanisation and changing consumption patterns are fast leading to the

growth of the retail industry in these nations.

T he small share of organised retail (just 4.6% in the case of India) and the highly

fragmented nature of most BRIC retail markets, leave plenty of room for new entrants

and also for market consolidation. Early movers have been able to and will continue to

reap the rewards here; and as early movers produce tangible results, retailers that are not

as yet in the BRIC markets will need to address this sizable opportunity .

The BRIC countries have all made an impressive impact on the global economy in these

early years of the twenty-first century, as each country in its own unique way experiences

sizeable build-up in economic wealth even while fighting protectionist trade barriers from

the developed world. Statistics show that within five years of the formation of the BRIC

concept, India and Russia have expanded their economy considerably while China clearly

leads the pack with its high GDP growth and understandably the most stable political

scenario,

BRAZIL

Brazil represents the 16th largest retail market in the world growing at 6.6% CAGR.

Brazil is a high-potential market for retail as a result of the country’s

large and growing population (expected to reach 200 Million by 2013) and its

attractiveness to foreign investors as a strategic base for the Latin America region which

will continue to attract money while creating additional jobs.


The Brazilian grocery market is consolidating rapidly as supermarket and hypermarket

chains strive to acquire good locations, achieve economies of scale and increase their

leverage with suppliers. However, with no group yet accounting for more than 10 percent

of the market and the top five still claiming just around 25 percent, there is potential for

still greater consolidation in the future.

Brazil has been a favoured FDI destination too. In retail, F&G was the most attractive

segment for FDI in Brazil till recently, with over US$5 billion invested. The growing

segments ripe for entry include: cosmetics and personal care, consumer electronics and

food and beverages -- such as juices, soft and alcoholic drinks.

RUSSIA

Russia’s economy has grown strongly for 8 years with 2006 growth just under 7% and is

attractive to foreign investors. National operators currently have the largest market share

but multinational retailers have strong positions in modern retail formats. Investment

priorities are similar to developed markets and include efficient supplychain, private label

and customer loyalty.

Russia's food retail market is extremely fragmented, and it is only in the cities of Moscow

and St Petersburg that significant consolidation has taken place. About 70-80 percent of

the organised shopping centre developments are concentrated in these two major cities.

On a countrywide basis, the top five grocers capture a combined share of around 9% of

the modern grocery distribution. There is also a marked absence of hard discounters in

this highly price-sensitive land -- thereby creating a huge opportunity area.

The main investors in Russia happen to be European countries. With the majority of

foreign investments directed towards retail and wholesale trade, more than in other BRIC

countries, Russian retail attracts a large portion of FDI. As far as retail categories are

concerned, besides grocery development, cosmetics and personal care hold much promise

with an annual growth rate of 15 percent. Currently there is also an absence of value

retail brands in Russia.


INDIA

India represents the 11th largest retail market in the world and is growing at 10.4%

CAGR. Given the lower income levels and comparatively strong restrictions on foreign

direct investment, foreign retailers have been far less active in India than in China. Lack

of infrastructure (roads, rail, etc) will impede growth. Spending on “Food at home” is

expected to represent over 50% of total spending by 2010.

The Government of India seems to be on a gradual, but definite path toward allowing

foreign retailers into the country. And when it finally opens the floodgates, the peak time

to enter will quickly pass -- giving retailers that enter now a distinct edge. Moreover,

apart from the metropolitan centres, retail formats in India's tier-II and III cities too are

growing, thanks to the expansion of the IT/ITES and BPO industries, which are

instrumental in creating consumption demand for high-end lifestyle products by

employing large numbers of youngsters.

The current policy prohibits FDI in retail trading, except for ‘Single Brand' product retail

subject to a maximum 51 percent foreign equity, and 100 percent FDI in wholesale trade

alone. India offers huge opportunities across all retail categories and formats, with the

largest opportunity waiting in the F&G sector, which is less than one percent organized at

the moment. Developing retail agribusiness ventures, among others, is advised .

CHINA

China represents the 3rd largest retail market in the world and is growing at a 9% CAGR.

China’s population of 1.3B consumers along with high economic growth Rates, recent

entry into the WTO and opening up of its markets offers retailers considerable

opportunities for growth. “Food at home” will remain the largest Segment.


Domestic retailers are now scrambling to enter tier-II cities to consolidate their positions

before global retailers establish themselves in these areas too. With growing urban as

well as rural incomes, national as well as international retailers are set to cash in on the

shopping boom.

China's implementation of WTO requirements, together with continued liberalisation and

deregulation has lead to increased investor interest. FDI typically occurs through foreign

companies where the foreign partner must hold at least 25 percent ownership. With a fast

saturating metropolitan scenario, opportunity today lies in tier-II cities and in rural hubs,

although it remains to be seen how the whole of China integrates in to the free enterprise

mode and still manages to continue with the present political system.

Market Trends, Challenges & Opportunities

1) Across BRIC countries, the food and grocery (F&G) segment is clearly driving

retail growth. For eg, retail food sales dominate the total retail market in Brazil,

accounting for almost 54 percent of the total retail sales, while Russia is the

fastest growing retail food sales market in the world, with the potential to again

double in size by 2008.

2) The prevalence of English as a language of communication to a very great extent

facilitates material sourcing and business communication. While India and Russia

pose no problems in this regard, Brazil and China present communication

problems for foreign companies.

3) The importance of governments that are quick on decision-making and passing

liberal trade laws cannot be emphasised enough. In China, for instance, being a

non-democratic country makes it easier for foreign investors to do business sans

bureaucratic red-tapism (in comparison to a democratic country like India), the

obvious reason being that the political establishment is not directly accountable to

the people.


4) Growing urbanisation and metropolitan saturation is leading to the expansion of

retail formats and investment opportunities towards tier-II cities and rural hubs

across all four countries.

5) Continued economic reforms together with the growth of organised retail

(especially in the F&G segment) has led to growing rural incomes, triggering off

far-reaching, social impacts. The upcoming ‘Golden Quadrilateral' plan for

roadways in India, which is to connect the four cities of Delhi, Kolkata, Mumbai

and Chennai, will have massive economic and social repercussions on rural and

semi-rural clusters along the vast network. In China too, the government plans to

create a rural retail network covering 70 percent of all villages by 2008.

6) Apart from F&G, personal care, consumer durables and electronics seem to be

other popular consumption segments, especially among the rising middle classes

with their rising incomes and changing consumption patterns.

7) ‘Localisation' of goods and services is extremely important for all global

companies planning an entry into the BRIC markets. These are all very vast and

diverse nations with multiple traditions and aspiration levels that need to be

tackled intelligently.

8) A non-economic, intangible market factor among these emerging economies

happens to be a rising sense of national pride that needs to be very sensitively

addressed by all foreign companies intending to set up businesses here.

9) Another common challenge across all BRIC markets is the near absence of

infrastructure problems.

Eye on India

India's imminent urbanisation process has implications for demand for housing, urban

infrastructure, location of retail, and demand for consumer durables.


The on-stream infrastructure development will drive growth in the transportation sector,

spur demand for vehicles, increase real estate values along the “Golden Quadrilateral”

corridor, and potentially boost construction of suburban homes as people escape

congested cities. Plus, it will open up thousands of villages en route to a global audience

and effectively integrate them with the growing Indian economy.

• Growth of the Retail market, to a great extent, is the dependent on the size of the

country's consuming class and the rate of growth of GDP, especially disposable incomes.

• India is the world's second most populous country and its GDP growth is likely to

surpass that of China by 2015.

• It is estimated that India's GDP will surpass that of the US before 2050, to make it the

world's second largest economy.

• Reflecting on the robust growth in India's GDP, consumer expenditure (in current

prices) grew at a relatively high pace of nearly 10 percent per annum over the past two

years.

• India's advantage lies in the fact that it has the largest young population in the world –

over 890 million Indians are below 45 years of age. The median age for India is 25 years

as compared to 28 years for Brazil, 33 years for China and 38 years for Russia.

• There are more English speaking people in India than on the European continent.

• The retailing industry in India, estimated at USD 270 Billion in 2006, is expected to

double to USD 440 Billion by 2010.

• The size of the organised retailing market in 2006 stood at USD 12.4 Billion in 2006,

thereby making up a mere 4.7 percent of the total retailing market.

• Of the total retail market, food and grocery retail is by far the single largest block

estimated to be worth a whopping Rs.642,200 crore, but more than 99 percent of this

market is dominated by the neighbourhood mom & pop stores.


• Clothing, textiles and fashion accessories constitute the second largest block.

• For the year 2007, the India Apparel Report 2007 expects growth of organised retail to

touch 40 percent. From 2008 onwards (until at least 2010), organised retail is expected to

register around 45 percent YoY growth in India.

• Total retail in India, which registered 5.7 percent YoY growth from 2004-2006, to range

between that and 6 percent YoY growth over the next 3-4 years.

• With these growth percentages and following from our estimates for 2006, the future

estimates* for organised retail in India: 2007– Rs.77,000 crore; 2008 – Rs.111,500 crore;

2009 – Rs.162,000 crore; and 2010 – Rs.235,000 crore. (*estimates based on 2006

prices).

• In terms of formats, the energy in terms of new investments is expected to be driven

towards the supermarkets and hypermarket segments.

• All new players – Reliance Industries, Bharti Retail/ Wal-Mart, AV Birla Group – have

shown interest towards developing these two formats, along with wholesale, cash & carry

outlets, while India's largest retailer – Pantaloon Retail India Ltd. – has a continuous store

rollout schedule for its Big Bazaar hypermarkets and Food Bazaar supermarkets.


BRIC:Carbon Foundation Of Economies


Price change is the ultimate focus of investors, but investing as a forward looking process

requires examination of fundamental issues. One fundamental issue in country analysis

is the degree of carbon dependency - principally oil, natural gas and coal.

Carbon based economies could once assume that carbon for energy and for material was

unlimited and that it would always be available. In World War II control of African and

Middle Eastern oil supplies was an important strategic issue that began to put carbon

availability as an issue into clearer view. By the 1970’s an OPEC oil embargo showed

that low cost oil was not a total certainty. In the last few years, both supply and price

have come into fierce focus. Globalization and global growth in standards of living

(essentially carbon dependent) have put geologic supplies of liquid carbon fuels into

question. Evolution of terrorism as a new global war with no end in sight has put

politically controlled supplies of liquid carbon into flux, along with disruptive price rises.

While there are non-carbon energy alternatives, such as uranium (proxy CCJ), the world

is so entrenched in carbon dependency that it is beyond individual investment time

frames to consider substitution on a global scale. While there are enormous coal supplies

and technologies to convert coals to liquids and gases (SASOL in South Africa: SSL),

these will take many years to implement on a global scale.

There is not necessarily a good or bad level of carbon dependency; however awareness of

each country’s carbon dependency could be useful in predicting economic performance

under scenarios with varying carbon price levels and available supply.

Some countries may do better in a carbon starved world, or in a scenario where carbon

prices or supplies are in crisis. The table below shows some key carbon dependency facts

for major countries and regions. Let’s think about what implications this data may

suggest.

BRIC (Brazil, Russia, India and China), for example, is anything but a monolith in terms

of carbon. Russia (proxy TRF) and Brazil (proxy EWZ) are major carbon exporters.

Brazil exports both non-renewable petroleum and renewable alcohol, whereas Russia

produces only non-renewable oil and gas. Russia is in a good carbon situation today, but


they are acting recklessly with relationships and they have not shown themselves to be

particularly trustworthy in the energy sector — caution is appropriate allocating to

Russia.

China (proxy FXI) is about to be, or may already be, the world’s largest carbon consumer

and is working very hard to sustain its carbon supplies to drive its economy and maintain

civil order ,which may depend on growth of its economy. India (proxy INP) is a net

carbon consumer, but nowhere near the level of China . India has built an economy

based on exporting brains and services, instead of manufactured goods as China has

done.

Both India and Brazil consume low percentages of world carbon and have low per capita

carbon consumption. That may mean they have lower short term sensitivity to a price or

supply crisis, except to the extent that their customers suffer from carbon problems.

Brazil, as a significant non-renewable and renewable carbon exporter and an economy

with low carbon consumption per capita, may be in the best situation to withstand a

carbon crisis. They are also more insulated from geopolitical risk and war than the other

BRIC countries.

FINANCIAL SECTOR


Financial services market consists of institutions such as banks, insurance companies,

finance houses and assets management companies, among others, that deliver products to

direct end users, the customers, being the largest and most visible single group of end

users.The retail products available to this group in its generic form include depository

accounts, credits and payment services. Though statistics are sketchy, it would not be out

of place to suggest that this market encompasses more than 300 businesses, which

include the 24 commercial banks; mortgage banks, securities companies and brokers,

insurance agencies, micro-finance banks and leasing companies, among others.

Retail financial services are considered heavily regulated, especially as offered by

commercial banks. Though deposit rates have been deregulated, competition in the

industry has kept rates in check. More radical changes in the industrial landscape has

witnessed importation of the global trend of convergence between corporate banking,

investment banking, retail banking and insurance, with universal bank licensing and the

merger process laying to rest any lingering thought of product dichotomy.

Banking and insurance products are well-established among India's growing upper- and

middleincome groups but other products, such as funds are not. Banks are looking at their

distribution and cross- selling strategies Although China may be grabbing most of the

headlines in terms of financial services opportunities, neighbouring India, the world's

largest democracy, is attracting its fair share of interest. Both are part of the BRIC

(Brazil, Russia, India and China) quartet of countries that are garnering huge investment

interest from the global banking community thanks to their enormous, underserved retail

and mass affluent banking markets.

Everyday financial services are out of reach for more than two billion people in

developing countries. But the rapid growth of branchless banking – including mobile

phone banking – is reducing the cost and expanding the availability of such services.

Brazil’s increase in access to finance has been accomplished largely through the more

than 95,000 banking “correspondents”—local merchants and post offices that act as


agents for banks, equipped with card-swipe and barcode-reading point-of-sale (POS)

terminals. In the past five years, technology has brought 13 million people in Brazil into

the banking system

In Russia, a broad network of bank ATMs, POS terminals, and online e-money providers

offer transaction services outside of traditional branch offices.

BRIC nations give highest returns in emerging markets

BRIC (Brazil, Russia, India and China) countries have outperformed other emerging

markets in 2008. According to Morgan Stanley Capital International's (MSCI's) emerging

market standard index, investments in BRIC countries have given a return of 50.22%,

while emerging markets of Eastern Europe gave second best return of 43%.

Among the BRIC countries, China, which was languishing for last four years, gave a

return of 71.68% as per MSCI index. Russia was ranked second with a return of 51.80%

and India came third with a return of 45.95%. Brazilian market gave a return of 40.46%

as per Index. In absolute terms also, the Chinese stock market outperformed other stock

markets among the BRIC countries. The 180-share index of Shanghai Stock Exchange

(SSE), which is called SSE-180, also considered to be a representative of Chinese Stock

Market, went up by 108% .

However, this does not mean that Chinese market has offered a superior return in the long

term. But later, the market turned bearish as government had halted the privatisation

programme.But later, as the government again pushed the reform programmes in

companies, investors' interest returned to the market.


Particularly, after the government's recent decision to divest a part of its share holding in

banks has helped the investors' confidence in the market. Recently, Industrial and

Commercial Bank of China raised $21.9 billion through an initial public offerings - the

biggest ever in the history of capital market.

Indian stock market has continued its bull run for the fourth year since 2003. The BSE

30-share index went up by over 42% per annum compounded annually. Every year since

2003, the sensex has been making records by touching new highs. A senior merchant

banker said the Indian market would have touched higher levels had the Manmohan

Singh government not halted the reforms in the public sector companies.

Shares of oil PSUs and public sector banks, except that of State Bank of India, did not

perform. While the sensex went up by around 47%, BSE index for public sector

companies improved by only 12% in 2006. Because of the continued bull-run, M-cap of

BSE has crossed $800 billion mark. The market cap of Chinese market has gone ahead of

India's because of its bull-run in the last two months when the SSE-180 stock index went

up by around 35%.

According to one estimate, the market cap of all the stocks quoting at SSE is over $ one

trillion. Till some time back, market cap of SSE was less than that of BSE. In case of

Brazilian and Russian markets, oil price plays an important role. The Russian Trading

System index closed at 1852.39 as against 1125.60 on the last trading year.

In case of Brazilian market also, the commodity prices play an important role. The most

prominent index Ibovespa, went up by 30.33% .

In 2007, BRIC-centric exchange traded funds (ETFs) were powerhouses. So far, 2008 is

telling a different story. The Claymore/BNY BRIC Fund (EEB) has seen challenges in


http://finance.yahoo.com/q?s=eeb

some of its four countries - Brazil, Russia, India and China. From its all-time high, it's

down 19%, reports Gary Gordon for ETF Expert, and the gains upward of 65% in

2007 feel like a memory. Year-to-date, the fund is down 10.7%.

Take heart, though: it's still above its long-term trend line (200-day moving average).

Gordon feels that the fund is still attractive, though: it has a low price and allows

investors access to all four emerging markets without being overweight in any single

country or having to purchase four separate ETFs. It takes the guesswork out of trying to

pinpoint which emerging economy is going to perform.

Mutual Funds to Invest in Brazil, Russia, India, China [BRIC]

Brazil, Russia, India and China are the dominant emerging countries in the world, and

as a whole, the future growth of the world economy depends on these countries

continuing on their growth path. Needless to add, mutual funds, hedge funds, ETFs,


http://en.wikipedia.org/wiki/BRIC

http://www.etfexpert.com/etf_expert/2008/01/how-long-will-b.html

http://etftrends.typepad.com/photos/uncategorized/2008/02/01/z_4.png

indexes, future, options and a host of other investing instruments have now

mushroomed to take advantage of the rapid growth in these economies. Many

companies that operate in these countries have listed their stocks in the New York

Stock Exchange as well, in search of a wider pool of investors and investment dollars.

The average investor can take the path of investing in individual securities, but this limits

the number of companies one can safely and easily invest in. It is far better to put money

into actual mutual funds that specialize in emerging economies with a specific focus on

the BRIC nations of Brazil, Russia, India and China.

Wall Street Journal recently reported that Franklin Templeton Investments, HSBC Asset

Management, Deutsche Asset Management and Schroders Investment Management are

among the fund companies that recently began offering BRIC funds to investors in

Europe and Asia, and to U.S. high-net-worth individuals. Nikko Asset Management has

launched a BRIC fund in Japan.

As you may note, these funds are not available to the average investor in the US - but if

you are a high net-worth individual then you can take advantage of these funds. There are

other options however, such as the American Century Emerging Markets and Managers

Emerging Market Equity that invest in all of the BRIC nations as well as other emerging

economies.

Another method to invest is to simply buy the ETFs that track the stock market indexes in

these countries. For example you could purchase the MSCI Brazil Index fund (EWZ),

and the MSCI India ETF, or the upcoming Market Vectors Russia ETF (produced by Van

Eck), and the MSCI China (HKD) or very broadly, simply the MSCI Emerging Markets

Index ETF (EEM). Also, take a closer look at all the closed funds that operate in these

countries. Funds such as India Fund, India Growth Fund, China Fund, Greater China

Fund, Brazil Fund and Brazil Equity Fund, and Templeton Russia Fund will give you the

exposure and diversification you need.

Last but not the least is funds that are based in those countries - local companies that

primarily cater to the domestic population. There are several very savvy fund managers

that operate in each of these countries, and who are intimately familiar with the local

conditions and now have developed a reasonably strong track record. Not all of them

have facilities to accept and disburse funds abroad, but either directly, or through banking

institutions, you should be able to access these funds. Alternatively, your broker should


http://www.managersinvest.com/index/funds-app/site.ret/id.63

http://www.managersinvest.com/index/funds-app/site.ret/id.63

http://www.americancentury.com/funds/fund_facts.jsp?fund=043

http://www.wisegeek.com/what-is-a-high-net-worth-individual.htm

http://www.nikkoam.com/english/

http://www.schroders.com/portal/site/schroders/menuitem.c13f04984a760f24097fcf104220334b/?vgnextoid=cee2048a5fab9010VgnVCM100000f2cb3dc8RCRD

http://www.deam.com/deamWeb/dyn/index.jsp

http://www.hsbcinvestments.com/global/generated/pages/portal_page/portal_page-en-UK.jsp

http://www.hsbcinvestments.com/global/generated/pages/portal_page/portal_page-en-UK.jsp

http://www.franklintempleton.com/

http://nigeriaworld.com/feature/publication/peterside/101405.html

be able to place orders in those countries directly and give you access to not only these

mutual funds, but to a large range of individual companies in these countries.

As with any asset allocation methodology, make sure that investments in the

BRIC countries make up a fixed, small percentage of your overall portfolio. Many of

these nations are experiencing serious, sustained growth for the first time in many

years - and are yet to face all the usual obstacles of business cycles, social moods

that may swing from pro-business to anti-business, protectionism and currency

upheavals. While the returns are wonderful, always take some money off the table

each time you make a serious profit in any of these investments. As mentioned

above, event risks are above average in these economies and countries.

Happy investing in the BRIC countries!

Emerging markets may be “high-risk, high-octane stuff”, says Justin Modray of Bestinvest in

The Independent on Sunday, but those who have been brave enough to invest in funds

covering Brazil, Russia, India and China (Bric funds) have seen “eye-popping” returns, says

Craig Karmin in The Wall Street Journal.

In the five months since launch, the Templeton Bric fund has returned 10.6% for investors,

while the Axa Talents Brick (the ‘k’ stands for South Korea) has risen by a third over the past

12 months.

That compares to a measly 0.7% return over the same period from the global emerging

markets sector. “Even the star managers in this sector couldn’t keep up with the Brics,” says

Tim Sharp in The Independent on Sunday.

SECT ION I . 01 B R I C F U N D S : F R O M E X P O R T T O

I N T E R N A L C O N S U M P T I O N

One of the bedrocks of the expansion in emerging markets has been exports. Russia and Brazil

have benefited from the price of oil and other commodities being pushed up by China’s and

India’s demand for raw materials, while Westerners have snapped up China’s cheap

manufactured goods. Many commentators fear, understandably, that this makes them

vulnerable to a slowdown, or even recession, in the US economy – something that seems more

and more likely to materialise in the year ahead.


http://money.independent.co.uk/personal_finance/invest_save/article2062380.ece

But there’s more to the Bric story than cheap goods. As their economies have developed, the

countries have become increasingly self-reliant. The emergence of a middle class in each

country is feeding a steady rise in internal consumption. With retail and financial services

booming as a result, there are signs that the Brics are now better placed than in the past to

weather a US downturn.

And investment bank Goldman Sachs (whose head of global economic research, Jim O’Neill,

initially coined the term Bric) certainly sees no slackening of growth in the near future – the US

bank has pencilled in average GDP growth of 8.5% for the Brics during both 2007 and 2008.

Indeed, O’Neill believes the Brics could “become bigger than the G6 by 2035”. He thinks China

represents particularly good value and that this year’s stockmarket rally “could be the start of

a bull market” lasting five years or more, says the FT.

Schroder International Selection Fund BRIC (Brazil, Russia, India, China)

Investment Objective and PolicyTo provide capital growth primarily through investment in equity securities of Brazilian,

Russian, Indian and Chinese companies.

PERFORMANCE ANALYSIS

Performance

in %

1 month 3 month YTD 1 Year 5 Year Since

Launch

Fund -14.47 -19.41 -14.47 34.47 - 124.57

Benchmark -15.55 -19.66 -15.43 37.12 - 135.15


Financial Ratios


P/Book Value 3.71 3.52P/Cash Earning 13.36 12.34P/E Ratio 18.85 18.85Predicated P/E Ratio 15.47 15.41ROE 19.30 19.77Dividend Payout Ratio 28.12 26.833 Year Earning Growth % 31.97 32.67


List of BRIC FUNDS

Templeton BRIC Fund - By Franklin Templeton Investments

HSBC BRIC Freestyle Fund - By HSBC Asset Management

Allianz RCM BRIC Stars Fund - By Allianz

db Benefit BRIC - By Deutsche Asset Management

SCHRODER BRIC FUND - By Schroders Investment Management

DWS BRIC Plus Fund - By Deutsche Asset Management (Asia)Ltd

NIKK BRICs Equity Fund - By Nikko Asset Management Japan

O B R I C F U N D S : R I S K S A N D R E W A R D S

Of course, there are risks in investing in emerging markets. Political interference, corruption

and bureaucracy are a fact of life in all four countries. But there is comfort in the fact that


valuations remain attractive. “Brazil is on nine times 2007 earnings and China and Russia on

11-12 times,” Julian Mayo, investment director of Charlemagne Capital, tells the FT.

For those who are interested in buying into the Bric, most financial advisers reckon emerging

markets should make up no more than 10% of a portfolio. The Axa Talents Brick is the fund

with the biggest exposure to China, at around 39%

BRIC Funds are volatile and carry a higher risk both in terms of market and currency

volatility which may result in dramatic fluctuations from time to time. Risks might also

include dealing difficulties, settlement and custody practices and the market for some of

the securities may be less liquid. Investments in emerging markets include investment in

Russia. You should be aware that although the Russian Registrar Companies, that provide

share registration services to issuers of Russian securities, are appropriately licensed in

Russia, they may not be subject to the same stringent controls, as in other, more

developed countries. This may mean that investors may not secure good title to the

Russian securities held by the local Depositary. Hence, because of the potential for even

greater volatility in such markets, there is a consequently greater risk of you not receiving

back all/or any of your investment allocated to this market. The Fund will hold typically

around 60 stocks. Lower diversification and active stock selection can result in greater

than average investment in individual countries, companies or market sectors. Such

concentration can give rise to more risk than where investments are spread over a larger

number of countries, companies or market sectors. Whilst this may increase the potential

gains, this concentration of exposure and lack of diversification may also substantially

increase the risk of loss in the Fund. Past performance is no guide to future performance

and the value of an investment and the income from it can fall as well as rise.

BRIC countries’ companies’ optimist for 2008

The manufacturing companies of the group of countries known as Bric (Brazil, Russia,

India, and China) are filled with optimism in relation to the business perspectives for the

next 12 months, notwithstanding the moment of strong crisis in the American economy.


According to the survey of the KPMG International consulting company, the Brazilian

companies are more confident regarding the level of business activity this year - 77.5%

believe it will increase and 1.2% that it will reduce. On the average of the Bric, 70%

foresee an increase of the level of activity, whereas 5.9% believe in the fall. KPMG has

surveyed 1.8 thousand companies in the four countries. The Brazilian companies are also

those which show the greatest optimism regarding the level of orders and employment in

2008. According to the survey, 76.3% expect an increase in the number of orders this

year, while 0.9% believes the number of orders will decrease. From the surveyed

Brazilian companies, 54.2% plan on hiring more employees, a percentage well above that

from China, where 31% of the companies intend to increase the number of employees

this year. The manufacturing sector of the four countries is also optimist in relation to the

perspective of revenues for the next 12 months: 71.1% of the companies expect growth.

The belief in the gaining of new customers and new orders is the main factor that leads

the companies of the four countries to bet on the increase of the revenues, followed by

the perspective of launching new products and innovations, and and to bet on the increase

of efficiency and management of costs. The Russian companies are the most optimist

ones (81%), followed by the Brazilian ones, with 74.9%.

O R G A N I Z A T I O N S T O T A R G E T B R I C C O U N T R I E S –

According to a survey conducted by PricewaterhouseCoopers, a UK-based professional

services firm, organizations outsourcing to emerging markets, such as Brazil, Russia,

India, and China (BRIC), are not focusing only on low-cost benefits of such countries;

rather, a majority of them perceive such countries as a huge market for their products and

services. About 50 percent of the organizations revealed that low-cost is the reason for

conducting business in BRIC countries, while about 75 percent revealed that access to

new customers and markets is the major reason.


About 80 percent of organizations surveyed agreed that they will sell their products in

BRIC countries. About 67 percent of executives interviewed revealed that globalization is

helpful as this will provide them an option of entering into markets of BRIC countries;

only 12 percent of the executives interviewed revealed that globalization has negative

impacts on their organizations.

A majority of the executives plan to sell their products in China, which has a huge

population. About 80 percent of the organizations are implementing strategies to target

the Chinese market, while about 55 percent plans to do so in the next few years. About 64

percent of the organizations agreed that India offers ‘significant market opportunities’,

while less than 50 percent agreed for it in the Brazilian and Russian markets

Bullish on BRICs

First, for the first time in recent memory, BRICs are growing not by borrowing, but by

investing. China has the world's highest savings rate. Russia is sitting on huge foreign

currency reserves, thanks to windfalls from oil profits. Even freewheeling Brazil is

showing heretofore unseen discipline by running a fiscal surplus.

Second, soaring commodity prices have put more money in BRICs’ pockets than ever

before. That means much less danger of a financial meltdown like the ones Brazil and

Russia had the 1980s and 1990s.


Finally, higher credit ratings mean that BRICs today can issue debts in their own

currencies. The result? Much more stable economic expansion and financing of

investment that depends on the whims of foreign investors.

BRIC countries to intensify cooperation

Rising economies Brasil, Russia, India and China have decided to gradually intensify

cooperation beginning with consultations at the ambassadorial level and then moving on

to political level.

Consultations will focus on issues of mutual interest in the international arena as also

those relating to trade, development and financial system.The decision was taken during a

ministerial meeting of the four countries on Monday on the sidelines of the ongoing

United Nations General Assembly session.


External Affairs Minister Pranab Mukherjee, who is leading the Indian delegation at the

UNGA, had a series of bilateral meetings with his counterparts during which

international issues as also those of mutual interest came up.

During a meting with Afghan Foreign Minister Rangin Sapanta, Mukherjee reiterated

India's firm commitment to assist Afghanistan in its efforts to rebuild its economy,

especially in infrastructure, and to support capacity building programmes aimed at

"Afghan-isation."

The two foreign ministers also reviewed "excellent" bilateral relations and discussed the

security situation in Afghanistan. They agreed that it posed a "significant challenge,"

officials said.Besides the Afghan foreign minister, Mukherjee also had in-depth

discussions on issues of mutual interest with the foreign ministers of Algeria, Singapore,

Cuba, Slovakia, the UAE, Slovenia and Canada. During their discussions, Mukherjee and

Algerian Foreign Minister Mourad Medelci agreed on the need to expand bilateral

cooperation, focusing in particular on the economic relationship.

As representatives of nations that had suffered greatly from terrorism, there is a close

similarity of views between the ministers on the threat posed by this menace, officials

said.During a half-an-hour meeting, Mukherjee and Singaporean Foreign Minister

George Yeo reviewed the strong bilateral ties between the two countries in the political,

economic, trade, cultural, defense and scientific fields.

In his meeting with Cuba's Foreign Minister Felipe Perez Roque, Mukherjee sought and

received a briefing on the health of Cuban leader Fidel Castro, officials said but gave no

further details.

The two ministers noted that the excellent bilateral relationship had developed over the


years with contacts at the highest levels, and they also recalled that Prime Minister

Manmohan Singh had called on Castro in September 2006, on the sidelines of the summit

meeting of the Non-Aligned Movement in Havana.

DATA COLLECTION

SECONDARY DATAMy study is based only on secondary data collected from multivariate websites . A

large number of online & published reports have been studied to analyze the growth

forecaste of BRIC countries. As nature of my study only needs secondary data

which is as follows:


Data pertaining to foreign investment in India has been acquire from the site

of….etc

Some facts & figures from journals, books, newspapers and magazines like

Deal maker, Business World, Economic Times, Times of India, Hindustan

Times,Financial Express, Business Today, Business Line etc.

Colossal amount of knowledge after watching the interview of Diligent

Personalities on CNBCTV18, NDTV, and Headline Today….. etc

Information gathers from key personnel in finance & Account department of

Indiabulls , & discussion with Representative Manager & Branch Manager

of the company

FINDING & ANALYSIS

Brazil, Russia, India and China as economies, would together overtake the

economies of the G-6 countries in the world by 2040.

By 2025 they could account for over half the size of the G6 - they are currently

worth less than 15%. Of the current G6, only the US and Japan may be among the

six largest economies in US$ terms in 2050

These fast expanding BRIC economies are expected to represent 44% of world

GDP by 2050.


Growth of BRIC economies boosts business worldwide & are the building block

of the whole globe

China and India, will become dominant global suppliers of manufactured goods

and services while Brazil and Russia would become similarly dominant as

suppliers of raw materials (energy, oil & mineral resources.) BRIC is now also

used as a more generic marketing term to refer to these four emerging economies.

BRIC countries represent 42% of the world's population

. China's economy will surpass Germany in the next few years, Japan by 2015,

and the U.S. by 2041.

India's growth rate will be the highest -- not China's -- and it will overtake Japan

(today the world's second largest economy) by 2032.

BRICs’ currencies could appreciate by 300% over the next 50 years, providing a

big tailwind for investors in BRIC assets.

Taken together, the BRICs could be larger than the U.S. and the developed

economies of Europe within 40 years.

Over the next two decades, BRICs will bring another 200 million people with

incomes above $15,000 into the world's economy. That's equal to the combined

populations of Germany, France and the U.K.

RECOMMENDATION


http://en.wikipedia.org/wiki/Service_(economics)

http://en.wikipedia.org/wiki/Manufactured_good

1. Government should set a minimum limit as well as maximum limit, within

which FII invest in India , in order to avoid volatility in Indian stock market

( sensex & nifty)

2. Government should allow more than 10% limit in LIC, Bank , Mutual

Funds,Pension Fund & other small companies to invest in India

3. Implementation of act is must & imperative in order to eschew from seasonal

variation , Rules & regulation are made , but follow up is not there

4. Generate new opportunities to allow more players from multihued countries &

in this way dwindle down the risk of volatility

BIBLIOGRAPHY

http://pickey.com

http:// reuters.com

http:// businessmonitor.com

http:// www.cia.gov

http:// /en.wikipedia.org/wiki/BRIC


http:// www.indiaretailing.com/emerging-markets.asp

http://www.business-standard.com

http:// http://www.marketwatch.com

http:// greenlightadvisor.com/glablog

http://

http://

www.

http:/

http://


ANNEXURES

TABLES

INDIA CHINA BRAZIL RUSSIA

Population 1.2 billion 1.4 billion 190 million 141 million

Population growth rate

1.606% 0.606% 1.008% -0.484%

Literacy 60% 90.9% 88.6%, 99.4%

Population below poverty line:

28% 9% 25% 15%

GDP rate 9.4% 10.5% 4% 7%


GDP (purchasing power parity):

$4.164 trillion $11 trillion $1.88 trillion $1.956 trillion

Currency (code): Indian rupee (INR)

yuan (CNY); real (BRL) Russian ruble (RUR)

Exchange rates: 39.40 per dollar 7.5 per dollar 1.8 per dollar 24.4 per dollar

Forex Reserve $ 250 billion $1.4 trillion $168 Billion. $463.5 billion

Private equity $2.51 billion $2.4 billion

CHARTES


GDP contribution India China Brazil Russia

Service 56% 40% 66% 56%


industry: 29% 49% 20% 40%

Agriculture15% 11% 14% 4%

GDP contribution

5640

66 56

2949

20 40

15 11 14 4

0%

20%

40%

60%

80%

100%

India China Brazil Russia

Countries

Agriculture

industry:

Service


Inflation in BRIC”s

Inflation In BRIC 2006

10.9

5.74

1.6

0

2

4

6

8

10

12

Russia Brazil India China

Countries

%


Countries Inflation in %

Russia 10.9

Brazil 5.7

India 4

China 1.6

BRIC- Nominal Budget Balance 2006

BRIC -Nominal Budget Balance 2006

7.5

-3.3

-7.7

-1.3

-10-8-6-4-202468

10

Russia China Brazil India

Countries

% o

f G

DP

Series1

\


BRIC-Total Government Revenue 2006

BRIC-Total Govt.Revenue 2006

37.8

30.8

17.3

9.7

0

5

10

15

20

25

30

35

40

Brazil Russia China India

Countries

% o

f G

DP

Series1

BRIC- Public Budget To GDP Ratio 2006


BRIC- Public Budget To GDP Ratio 2006

74.967

17.912.8

0

10

20

30

40

50

60

70

80

Brazil India China Russia

Countries

% Series1

BRIC (Brazil, Russia, India,


India Dreaming with BRICs: The Path to 2050

In 2003 Goldman Sachs (a leading global investment management firm) came up with a research report called “Dreaming with BRICs: The Path to 2050″.According to Wikipedia BRIC (Brazil, Russia, India, and China) is a coalition of regional and superpowers reportedly proposed by Russian President Vladimir Putin.


The BRIC research findings:If things go right, the firm’s economists argued that, given sound political decision-making and good luck, the BRIC economies together could become larger than those of the world’s six most developed countries in less than 40 years. i.e BRIC economies of Brazil, Russia, India and China together would be larger than G6 (G7 excluding Canada) in USD in less than 40 years. Of the current G6, only the US and Japan may be among the six largest economies in US dollar terms in 2050


Emerging markets have weathered the U.S. credit market calamity very well and the bull

run will continue in 2008. The economic decoupling between emerging economies and

the U.S. is attributable to underlying fundamentals and is therefore sustainable


Today, emerging markets BRIC countries sit atop a current account surplus in excess of

$700-billion, and it is the industrialized G7 who are in debt, by the same amount. Longer

term surpluses in excess of $3-trillion are to be found on the balance sheets of mostly the

BRIC countries today in the form of Foreign Exchange surpluses, and trade surpluses.

China alone now nurses a trade and forex surplus nearing US$1.5-tillion. Russia, has

managed to build up reserves of US$450-billion as well as Putin’s US$150-billion

‘contigency’ fund, set aside so that it may sidestep any kind of financial shock. India has

amassed a forex surplus of around US$275-billion. Brazil’s forex reserves now stand at

US$178-billion.


BRIC countries have been financing the debt, and driving the growth of G7 countries for

the last 5-7 years. Today, around 60-70% of emerging markets sovereign debt is

investment grade rated and all 120 companies that form the key MSCI Emerging Markets

Index have ADR listings.


CONCLUSION

China has emerged as the worlds manufacturing hub, while India has come on very

strong as its counterpart hub in services, both providing Western firms access to

inexpensive educated and -or- highly-skilled labour. Russia, under Putin, has successfully

emerged as a highly profitable energy and raw materials producer, second in oil and gas

reserves to Saudi Arabia. Brazil has changed the regional balance in the Americas by

turning itself into the winds of east-west trade in hard and soft commodities and using its

strength to bolster its new economic clout in relation to North America


dissertation on BRIC countries by ashish

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