BRICs go into battle: India vs South Africa

Round three: war across the ocean – India vs South Africa

In each issue this term, The Gateway is pitching one of the four BRIC economies - Brazil, Russia, India and China - against one of the second tier of emerging markets nations. Which country has the brightest future? We'll try to decide.

This time, a south Asian powerhouse takes on Africa's largest economy.

Ingenious India

India's emergence as a hugely significant global economic power in recent years has been due in large part to its sizeable educated workforce and its ability to embrace new industries such as IT and communications. It's now the ninth-largest economy in the world, and the fourth fastest-growing, doing so at a rate currently higher than that of the Chinese economy.

However, the country has been described as the world's most vulnerable emerging market, a tag which reflects its propensity for government mismanagement, civil unrest, and rampant inflation. In addition, the country's huge population - due to outgrow that of China over the next 20 years - could hamper its progress as well as adding to its workforce. The need for infrastructure to support India's incessantly expanding cities means the country's coal, oil and metals requirements are rising. With relatively few sources of these commodities to call its own, the government finds itself heavily reliant on overseas imports, placing a great strain on the country's finances.

A new South Africa?

The term "BRICs" was coined by economist Jim O'Neill to refer to a notional group of emerging markets. But the countries involved subsequently formed an official political organisation, and last year, South Africa, as another major emerging market, was invited to join, making the group the BRICS. It accounts for roughly 25 per cent of the African continent's GDP, and is also popular with global investors because of the role it plays as a gateway to the rest of the African market .

While the country's transition to democracy following apartheid has been far from plain sailing, its political rehabilitation into global trade circles has proved the catalyst for considerable economic development. South Africa's biggest asset remains its mining sector (the country is the world's largest producer of gold, platinum and chromium, and also boasts enviable coal and diamond reserves) which has allowed it to benefit from the growing global demand for raw materials from states such as China and India.

However, despite significant economic progress, South Africa remains a country beset with major problems. The move to a democratic political system has proved beneficial for sections of the country's black majority, but poverty and unemployment remain major issues for many. Some 25 per cent of South Africans are officially out of work, while half the population is estimated to be living below the poverty line. In addition the country, much like India, faces significant challenges in modernising its crumbling infrastructure after decades of underinvestment, with power shortages a major hindrance to mining and industrial output. The social problems caused by high rates of crime and of HIV/AIDS infection are also hindering the nation's economic advancement.

Verdict: Indian summer

India's problems, while plentiful, are unlikely to prevent the advance of what is increasingly one of the world's most important economies. However, with fossil fuels in ever shorter supply, its government must find new ways to fuel its growth. Ironically, South Africa has the opposite problem in trying to find ways to diversify its economy away from primary industries such as mining in order to provide jobs for its unemployed masses. Both countries face a difficult path over the next few years, but India's is arguably the smoother of the two.