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Book Review: Breakout Nations - K S Narayanan - The Sunday Indian
 
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Book Review: Breakout Nations

 

The growth games
K S NARAYANAN | New Delhi, June 22, 2012 15:27
Tags : BOOK REVIEW | Breakout Nations BOOK REVIEW |
 

During last few years, conventional wisdom was that the economic centre of gravity of the world is shifting away from the advanced Western world to emerging markets – BRIC nations (Brazil, Russia, India and China). Now we are witnessing a sudden slowdown in the emerging markets as the brick has hit the wall.

Ruchir Sharma, head of Morgan Stanley in his provocative book, Breakout Nations – In Pursuit of the Economic Miracles, discusses the emerging new global economic landscape not merely by reading excel sheets but by undertaking a fact finding mission in the nooks and corners one week every month in particular emerging market for the last fifteen years.

The outcome of such an economic pilgrimage is the central thesis; that BRIC nations will be part of history and will be replaced by Breakout Nations. To begin with he defines ‘Breakout Nations’ in terms of expectations and how that country will do among the peer group.

The era of easy money and easy growth that happened during the first decade of the 21st century is over. China, in particular, will soon slow but its place will not necessarily be taken by Brazil, Russia or India, all of which Sharma shows have weakness and difficulties often overlooked in the inflated expectations and emerging markets mania of the past decade.

Which are these Breakout Nations? According to Sharma they will spring from the margin and even from shadows and goes to identify Turkey and Indonesia (Muslim – Populous and Democratic), Poland and the Czech Republic in Europe, Sri Lanka and the Philippines in Asia. Nigeria and East African nations may qualify too.

To justify the premise of his central thesis, Sharma quotes Antoine Lavoisier, the  father of modern chemistry who had said “Nothing is lost, nothing is created, and everything is transformed.” As big emerging markets slow, breakout nations will rise.

Cut to India. Can India be a Breakout Nation? Does India have what it takes to be a Breakout Nation? Or else is India losing out on the momentum and falling back to slow growth syndrome?

The book is timely, coinciding with the downslide in India’s growth story after peaking to 9 per cent in 2005-06 to 6.5 in 2011-12.

So the growth game is all about expectations. “People are always asking me, so what if India slows from 9 per cent to 6 to 7 per cent – that is still three times faster than growth in the West, right? Well, for India that slip would initially feel like a recession, because it is one of the poorer nations in the low-income group – the economies with per capita income under

$ 5,000 - and every Indian has come to enjoy the levitating sensation of rising fast from a low base” Sharma observes. India has 50 per cent chance of emerging as a ‘Breakout Nation’, only if it exceeds 7 per cent growth, he adds.

In an essay titled, The Great Indian Hope Trick he brings to fore facts like how the total fiscal deficit has ballooned from 6 per cent to 9 per cent, the total public–debt–to–GDP ratio is now 70 per cent (highest among any developing countries) and that India can ill–afford it and trashes hopes of India benefiting from a demographic dividend.  In the same chapter he draws parallel between India and Brazil citing how both are high context societies rooted in tradition, history and favouring the in-group, vulnerability to corruption, how Orkut is popular only in these two countries as it fizzled out in others and lastly how India embarked on Mahatma Gandhi National Rural Employment Guarantee Programme that guarantees the rural poor one hundred days of public employment each year at an  annual cost to the treasury of nearly $ 10 Billion, similar to Brazil’s the Bolsa Familia.

Shama takes the reader on a tour of the world in the 14 chapters dedicated to China, India, Brazil, Mexico, Russia, South Korea, Turkey, Vietnam, South Africa and several others while explaining economic and political forces that are in the play that will make or break nations.

However, Sharma intelligently cautions the reader against all economic forecast, probably including his one at the outset itself. “The old rule of forecasting was to make as many forecasts as possible and publicise the one you got right. The new rule is to forecast so far into the future that no one will know you got it wrong.”
Only time will tell whether even Sharma got it right, till somebody comes with new forecasts.

Sharma ends his book with a warning that can seldom be ignored that no one can hope to grow as a free rider on the tailwinds of fortuitous global circumstances, as so many in the last decade. They will have to propel their own weight, and the breakout nations of the new era will take their mantra from a Latin proverb: “If there is no wind, row”. 

Author: Ruchir Sharma

Edition: Hard back

ISBN: 978-1-846-14556-8

Pages: 292

Price: Rs. 599

Publisher: Penguin


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Issue Dated: Feb 5, 2017