Indonesia won’t replace India in BRICS: Stanchart economist

Will Indonesia replace India in BRICS (Brazil, Russia, India, China and South Africa) — the league of powerful emerging nations — in the near future?

Although growth has slowed down in India, and Indonesia has emerged as the favourite for foreign investors, there’s no chance of Indonesia replacing India, says Standard Chartered Bank managing director and senior economist Fauzi Ichsan.

“India will remain in BRICS. What can happen is that Indonesia may join BRICS by 2014 and the league may become BRIICS. India is a much bigger economy which is expected to do well in the coming years,” Fauzi said.

“The growth rate of the Indian and Indonesian economies was 2nd and 3rd highest among the G-20 nations. Both economies have large domestic markets that helped shield them from global economic slowdown and global trade contracts. Indonesia also attracted global investors attention during this period when GDP growth has been over 6.5 per cent over the previous years,” Fauzi told The Indian Express.

According to him, with Indonesia likely to join the BRICS club by 2014, India-Indonesia economic relations will strengthen further.

“Moreover, political-economic similarities between India and Indonesia would foster Indian FDI into Indonesia, as Indian investors are used to challenges in a young democracy,” Fauzi said. 

Despite global economic slowdown, trade between India and Indonesia has strengthened over the last decade.

“Indonesia which is a major coal producer in the world attracted several Indian corporates which are keen to invest in coal mines in the country. Nearly 70 per cent of India’s coal requirements are imported from Indonesia,” said Prakash Subramanian, MD and head, global markets, Stanchart, Indonesia. 

Over the years, quite a few Indian corporate groups have set up operations in Indonesia. The Tata group, the Anil Ambani group, the Adani group and Essar have bought stakes in Indonesian mines.

India is Indonesia’s fourth largest destination of non-oil and gas exports after China, Japan and the US. Exports to India rose 35 per cent to $13.3 billion in the year 2011. FDI from India rose 37 per cent to $ 4.3 billion mainly in manufacturing products like pharmacy, motor cycles and textiles. The bilateral trade is expected to rise to $ 25 billion by 2015, Jakarta-based Subramanian said.