Global Themes

On Globalization & Venture Capital

The Gospel according to Goldman Sachs

My good friend Tosh (author of “The Rising Elephant“) sent me one of his recent articles last week titled, “Eye On The Tigers” which makes the point that putting the all the BRIC countries in one basket may not only be unwieldy but also confusing and possibly inconsistent.

brics-report-pic.jpg  Excerpts:

The BRICs report published in 2003 by Goldman Sachs – which foresaw the rise of Brazil, Russia, India and China as global economc powerhouses, has acquired the aura of a Delphic Oracle.

Nevertheless, it remains confusing with regard to some key assumptions and conclusions, particularly for policymakers.

The first problem is the heterogeneousness of the BRIC membership. Demographically, Brazil and Russia have a combined population of just 330 million – against 2.4 billion for India and China.

Russia, by many accounts still a nuclear-armed superpower, is essentially an exporter of com m odities to the West and of arms to China and India – which, in some cases, its own armed forces cannot afford.

Russia is also ageing fast: 15 percent of its population is over 65 years old,against a mere 5 percent in India.

For its part, Brazil’s growth is three to four times lower, and its income distribution far more skewered, than India and China.

Indeed, the lack of a meaningful middle class is one reason for Brazil’s stagnation, while its presence in India underpins the surprising spurt in its GDP growth.

More perplexing is Goldman Sachs’s faith in the three-fold gap between Chinese and Indian GDP lasting for the next 25 years.

India has been far more efficient than China in moving up the global value chain.

Its telecoms market is now the w orld’s fastest grow ing.Outbound Indian acquisitions, ahead of China in both quality and scale, are another example.

… All this may be overlooked.

What cannot is the report’s unquestioning faith in the continuity of the current global order.

To show precedents for the BRICs, the Goldm an Sachs team turn to Japan and Germany’s rapid growth after World War II.  Such straight-line insight may well apply to Japan and Germany, or Brazil and Russia…

To imagine this is true for India and China, inhabited by a third of the w orld’s population (and sometime soon, half its workforce), is curious.

…Devoid of the yardstick of the dollar,  things look quite different . Both within the BRICs,and for the world outside.

For in purchasing power terms, China’s econom y is over tw ice the size of India’s,  while India’s is larger than those of Brazil and Russia combined.

More dramatic is the fact that the Indian and Chinese econom ies are together already equivalent to those of the U S or the EU.


I would enourage you to read the article in full – especially if you have anything to do with policy-making in Europe.

June 6th, 2007 Posted by | China, Emerging Markets, Globalization, India | 2 comments


  1. Shantanu – interesting but ‘us and them’ has been a common basis of macro-generalisations for a long while, and so with the BRICS report. The granularity follows in their follow-up reports and the most recent update on India is fascinating..

    Comment by Shefaly | June 7, 2007

  2. Good post. Thank you for posting the report.

    Comment by Indiamusing | June 9, 2007

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