BRIC under stress

As the spiralling prices of crude oil and commodities threaten the world economy, the BRIC (Brazil, Russia, India and China) countries—made famous in 2003 by a Goldman Sachs paper, and now often used as a proxy for emerging market economies— are feeling the stress even though business confidence remains robust.

Over half of 1,400 service sector companies in the four countries, surveyed by global consulting firm KPMG, expect annual growth of their total operating costs to accelerate over the next 12 months, citing dearer raw material prices, staff salaries and outsourcing costs.

Inflationary expectations were highest in Russia and lowest in Brazil; India was at the third place behind China, the Spring 2008 KPMG Business Outlook Survey, based on six sectors (Hotels & Restaurants, Transport & Storage, Renting & Business Services, Post & Telecom, Financial Intermediation, and Other Services), says.

The BRIC firms, however, remain confident about their business prospects (they expect growth in business, revenues, profits, and pricing power) over the next 12 months. “Although the overall ‘net balance’ of firms forecasting growth of activity (+58) was down compared to the figure for last autumn (+65.7), it was still indicative of buoyant optimism,” the survey noted.

As for India, more than 60 per cent of the service providers polled —the highest among the four countries—expect an increase in levels of business activity, and about 58 per cent anticipate higher profitability.

—Kapil Bajaj