Comparisons between BRIC (Brazil, Russia, India, China) and MINT (Mexico, Indonesia, Nigeria, Turkey) reflect a serious issue. India and Indonesia both are developing markets that face problems that are quite similar.
The issues which India faces include the devaluation of Indian currency in relation to the U.S dollar, which has recently been steep but nonetheless has been an issue since long. The highest point being 13% while 7% per annum being the average, the instable economy has its roots in inflation and devaluation of the currency.
The agrarian nature of the economy, which although suffices the domestic stocks, exceeds the supply over demand at times. The increase in fuel prices also plays an important role in the ‘artificial’ hike in food prices.
The cutting down of subsidies, the corruption-filled system, the rising interest rates, all add to the worsening economic situation. And as foreign investment continues to drop off, the domestic finances are expected to get tighter and this could lead to a broken market which might get beyond repair.
On the other hand, Indonesia is ahead of India as far as politics is concerned, in fact it is the most politically stable among the new MINT countries. Since 2007, the economy has grown on an average of 5% every fiscal quarter. The Indonesian economy is also considered as the most rapidly urbanizing population in the world.
But the economy that has concentrated on export and natural resource extraction might end up in the same trap as India. Over-dependency on primary resources for income has neglected other alternative markets. Parallels can be drawn between India and Indonesia for its agriculture related ‘middle income trap’ and the inability to commit to higher income industries. Although, Indonesia has a comparatively lesser labor force in agriculture, it faces the same stable income trap while inflation continues to grow. This curtails the growth of the Indonesian economy.
Same problems can be tackled with similar solutions for both India and Indonesia. Both need skilled workforce and domestic infrastructure development. Lack of trained personnel has its roots in the absence of standardized educational reforms, which both economies face as a major problem. Both the markets have the potential to increase their skilled workforce and grow in emerging markets of trade and technology.
But government paralysis is one major setback for both of them. While India faces the issues of a diverse population, Indonesia has a weak central government, owing to which the efforts to grow will most certainly face hindrance.
And in the end, the growing living costs and unbearable inflation will overshadow the efforts made for economic growth.
Source: http://articles.sandhira.com/why-india-and-indonesia-could-be-bankrupt-in-the-next-10-years.html
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